With the sell-off on the day, the Nasdaq and the S&P 500 fell to their lowest closing levels in a month.
The major averages all closed in positive territory, although the tech-heavy Nasdaq outperformed its counterparts.
Gold, another classic safe haven asset, was trading at around $1,292 per ounce, up more than two percent this week and near a nine-week high. Eastern time. The Dow Jones industrial average added 41 points, or 0.2 percent, to 21,885.
Apart from geopolitical worries, some technical analysts like Tom McClellan, editor of the McClellan Market Report, blamed seasonality for this week's retreat given August's record as a weak month for stocks.
The weaker-than-expected consumer price data in July, which pointed to benign inflation, could cause the Federal Reserve to hold off from raising rates again this year.
Against the euro, the dollar is valued at USD1.826 compared to yesterday's USD1.1772. US -traded Nikkei futures fell 2 percent to their lowest since mid-May.
The market was also waiting for United States inflation data on Friday that would offer clues about the extent to which the strengthening U.S. labour market is spilling over into inflation.
The market slide accelerated slightly in the last half-hour of trading as President Trump denounced North Korea's nuclear program.
Equities slid and the Swiss franc and some developed-market government bonds advanced as President Donald Trump threatened North Korea with "fire and fury" following a series of missile tests by the communist regime, boosting demand for haven assets.
"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.
"Military solutions are now fully in place, locked and loaded, should North Korea act unwisely", he tweeted.
He goes on to say: "In all likelihood the North Korea threat will persist for years to come, with the U.S, and increasingly China, attempting to contain and restrain Kim Jong-un".
The world equity markets have lost 1000 billions of dollars of funding since the beginning of the verbal sparring between the United States and North Korea.
KEEPING SCORE: The Standard & Poor's 500 index fell 7 points, or 0.3 percent, to 2,466 as of 11:20 a.m. The index bounced off its lowest closing level in six months.
The utilities index, often seen as a bond proxy because of its companies' slow reliable growth and high dividends, was the only S&P sector that ended the day up, showing a 0.25 per cent gain. The stock has more than doubled over the past 12 months, gaining more than 160%. The Russell 2000 index of smaller-company stocks picked up 1.69 points, or 0.1 percent, to 1,374.23. Japan was closed on a public holiday.
The major European also saw further downside on the day. While the French CAC 40 Index fell by 0.6%, the German DAX Index slumped by 1.1% and the UK's FTSE 100 Index plunged by 1.4%.
The yield on the benchmark 10-year Treasury note settled at 2.191%, its lowest close since June 26, compared with 2.211% Thursday and 2.269% last Friday. It also raised its outlook.