Japanese markets were closed for a holiday, but the tense mood dragged Asian shares lower and an MSCI index of stocks across the globe posted its largest weekly drop since the week before Donald Trump won the United States presidential election in November.
Trump issued a new tweet-warning to Pyongyang on Friday: "Military solutions are now fully in place, locked and loaded, should North Korea act unwisely".
Japanese markets were closed for a holiday but the yen powered on, hitting an eight-week high of 108.91 yen to the dollar, adding to its biggest weekly gain since May.
The yen is often sought in times of geopolitical tension, partly because Japan has a big current account surplus. "North Korean tensions continue to escalate", leaving the Swiss Franc, and possibly the USA dollar, as the remaining beneficiaries of risk aversion, Emmanuel Ng, currency strategist at OCBC Bank in Singapore, wrote in a note. It was on course for a weekly rise of about 5%, the biggest such gain since July 2016.
In bond markets, the yield in U.S. Treasuries fell, also pressured by the lowered expectations for a Fed move.
Singapore's DBS bank added in a statement that the yen "remains the safe haven currency from the sabre-rattling between US President Donald Trump and North Korea". "But with the rhetoric having gone to a different level, the market just can't afford to take that risk".
Many markets have recently climbed to record or multi-year highs, leaving them vulnerable to a sell-off.
But the yen added to an already-strong weekly rally of close to 1.5 percent, hitting its highest in nearly four months versus the dollar at 108.73 yen. Spot gold reached a two-month high. It is heading for a 2.5 percent drop for the week.
The S&P 500 dropped the most since May and MSCI's gauge of stocks across the globe .MIWD00000PUS lost 1.1 percent in its third straight day of declines, as it pulled further back from all-time highs.
Possibly due to the lack of appetite for risk in the market, the euro suffered on Thursday, down slightly against the dollar by 0.09% at 1.1749, slipping towards a two week low.
"The war of words between the leaders of the US and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada. US gold futures gained 0.26 percent to $1,293.50 an ounce.
"This situation is beginning to develop into this generation's Cuban Missile crisis moment", ING's chief Asia economist Robert Carnell wrote in a note.
Global benchmark Brent also lost 0.9 percent to $51.44, after Thursday's 1.5 percent drop.
The dollar index fell 0.32 per cent, with the euro up 0.42 per cent to US$1.1819.
Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in US crude inventories. Palladium added 0.4% to $899.80 per ounce and was on track to end the week about 2% higher.
The dollar index slipped to a one-week low on Friday after the U.S. data.