"The market has been looking for an excuse to sell off and North Korea and the president gave the market that excuse", said David Schiegoleit, managing director at the U.S. Bank Private Client Wealth Management.
"While not necessary unexpected - as the U.S. had to respond to threats made by North Korea that they will fire rockets due to land just off the coast of Guam soon - new comments by Trump propelled stocks lower". US stock index futures also fell, with the S&P 500 indicated to open down 0.5 percent ESc1 1YMc1.
"The markets in general are very on edge and they're very leery about risk", Mariann Montagne, a portfolio manager at Gradient Investments, told Bloomberg.
"While the U.S. President insists on ramping up the war of words, there is a decreasing chance of any diplomatic solution", Carnell said.
But U.S. stocks regained some lost ground, despite Trump's comments Friday that U.S. weapons are "locked and loaded", ready to respond if North Korea acts "unwisely".
If the North Korean regime "does anything" to the USA or a United States ally "things will happen to them like they never thought possible", he told reporters on Thursday, according to Bloomberg. These have ranged from an investigation into Russia's possible interference in the 2016 US presidential election, to concerns about China's risky debt levels, to stubbornly low inflation in the U.S. The index closed at 16.04 overnight, the highest level since November 8, when Trump was elected president.
Meanwhile, gold demand in India remained sluggish this week as local prices jumped to their highest level in almost three months and a rally in global prices dampened fresh buying elsewhere in Asia.
At the close trading in NY, the Dow Jones Industrial Average was down 204.69 points, or 0.9%, to 21,844.01, its biggest one-day fall since May 17. While the German DAX Index closed just below the unchanged line, the U.K.'s FTSE 100 Index and the French CAC 40 Index both tumbled by 1.1 percent.
South Korea's won currency KRW=KFTC dropped 0.9 percent against the dollar to its lowest close since July 13.
European markets end lower amid geopolitical tensions
Wall Street's fear gauge - the CBOE Volatility Index or the VIX - surged 44%, its second-biggest one-day jump of the year. In Europe, equities dived with London losing 0.6 percent, while Frankfurt shed 1.1 percent and Paris fell 1.4 percent.
The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize. It was down 0.2 percent at 108.96 yen, after retreating 0.7 percent on Thursday.
U.S. Treasury long-dated yields dropped to six-week lows, pressured by U.S.
The Swiss franc reversed a two-week losing streak and gained 1.1 percent to 0.9611 per dollar CHF=.
At 10:57 a.m. ET (1457 GMT), the Dow Jones Industrial Average was up 54.38 points, or 0.25 percent, at 21,898.39, the S&P 500 was up 8.69 points, or 0.35 percent, at 2,446.90.
The 30-year bond US30YT=RR last rose 6/32 in price to yield 2.7847 percent, from 2.794 percent late on Thursday.
Markets are now focused on US consumer price data for July, due later in the session.
The euro dipped 0.1 percent to $1.1737 EUR= but the single European currency has been slipping this week against the dollar, having hit a more than 2 1/2-year high of $1.1892 on August 2. It was on course for an over 5 per cent weekly rise, the highest such gain since July 2016.
Crude futures meanwhile extended losses on fears of slowing demand and lingering concerns over global oversupply.
US crude CLcv1 rose 0.43 percent to $48.80 per barrel and Brent LCOcv1 was last at $52.01, up 0.21 percent on the day. It is poised to end the week down 1.7 percent.