Equity markets from Asia through to the U.S. have fallen, and traditional safe havens are up. Falls of just 0.3% were recorded by both the Dow Jones industrial average and the more broad-based S&P 500 in early trading.
The Nasdaq Composite dropped 49.53 points, or 0.78 per cent, to 6,320.93.
The Swiss franc jumped on Wednesday and higher yielding currencies such as the Australian dollar tumbled as the latest bout of geopolitical tensions emerging from the Korean Peninsula prompted investors to cut positions.
Tensions have been rising in the Korean Peninsula, and reached a new level with President Trump's "threat" of "fire and fury" against North Korea if they should proceed with a missile strike against Guam, a United States territory located in the Pacific.
"The typical text book trade is that investors rush for safe havens".
"They will be met with fire and fury like the world has never seen".
The VIX rose further on Wednesday, rising as far as 12.11, its highest in nearly a month.
Flight-to-safety moves pushed up the value of classic assets perceived as safe, including the franc, the Japanese yen and gold prices after North Korean leader Kim Jong Un made an explicit threat to strike a US military base in Guam.
In Europe, the pan-continental STOXX 600 index fell 0.9 per cent, with falls deepening after a auto rammed a group of soldiers in Paris, injuring six, in what officials said was a suspected terrorist attack.
Globally, France's CAC 40 share index fell 1.5 percent by the afternoon; Germany's DAX fell 1.3 percent.
Shanghai dipped 0.3 percent and Hong Kong's Hang Seng lost 1.3 percent.
Instead, investors turned to assets that tend to benefit in times of geopolitical and financial stress. The EUR/JPY was down 0.54% to trade at 128.924 Yen while the GBP/JPY was down 0.58% to trade at 142.489 Yen.
Against the dollar, the franc surged 0.6 percent to 0.9688 francs, reversing a two-week losing streak. The Swiss franc is up close to 1.5%, its strongest one-day rise since 2015, and gold is up 1% to $1275 per ounce, its highest level for eight weeks. It was last up 1.2 percent at 1.1305 per euro. The U.S. currency was down 0.3 percent at 109.94 yen, following a retreat to 109.740, its weakest since June 15. The 10-year Treasury note yield initially fell to a six-week low of 2.212 percent as bond prices rose, but climbed back to 2.250 percent. Ten-year US yields dropped 4.3 basis points to 2.24 per cent and German equivalents fell 3 bps to 0.43 per cent, a six-week low.
The franc was not the only beneficiary to the risk-off sentiment sweeping markets.
"But looking ahead unless we start to see a conflict break out or a major stock market correction, (gold) is capped at 1,295 (although) the upside at moment is the favored direction".
In commodities, crude oil lost momentum after rising overnight on data pointing to declining US inventories.