The Russell 2000 index of smaller-company stocks gave up 4.02 points, or 0.3 percent, to 1,410.15. Health care and consumer-focused companies were among the biggest laggards.
“Most investors will be completely out of their depth in making any assessment on the (North Korea) situation”, said Koon Chow, emerging market FX strategist at fund manager UBP.
Investors reacted by driving up the price of gold and bonds, traditional safe investments.
Spot gold rose 0.6 percent to $1,267.79 per ounce at 1004 GMT, while US gold futures for December delivery rose 0.9 percent to $1,273.50 per ounce.
The broad-based S&P 500 was hit even harder, dropping 35.81 points (1.45 per cent) to close at 2,438.21, while the tech-rich Nasdaq Composite Index lost 135.46 points (2.13 per cent) to 6,216.87.
Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions over North Korea have proved the trigger.
In the latest developments between the two countries’ war of words, President Donald Trump issued another set of statements on Thursday, saying that his warning of bringing “fire and fury” to North Korea – if it continues its threats – may not have been “tough enough”.
“The fact that Trump has said North Korea better not do anything to U.S. interests and their allies” interests or “you’ll be sorry’ has really upset markets”, he said.
With the tense mood pushing European shares down for a third day, global stocks were on course for their worst week since Donald Trump won November’s US presidential election. The market is looking for crude stocks to have fallen by -2.7m barrels and gasoline by -1.5m barrels. Natural gas gained 2 cents to $2.82 per 1,000 cubic feet.
USA dairy group Dean Foods dropped nearly 21 percent as its quarterly earnings fell, and the stock received a downgrade from JPMorgan.
Disappointing earnings also helped pull the market lower Wednesday. MetLife fell 75 cents, or 1.6 percent, to $47.56, while Charles Schwab slid 69 cents, or 1.6 percent, to $41.33.
Beyond geopolitical concerns, investors continued to size up company earnings reports.
There was a late selling spree on Wall Street after the President’s response. The euro fell to $1.1728 from $1.1757. Its shares tumbled $11.35 to $61.99.
Also in the spotlight was Toshiba Corp, which was demoted to the Tokyo Stock Exchange’s second section this month, Its shares rose 3.2 percent after sources told Reuters the Japanese conglomerate’s auditor was likely to sign off on its annual results.
The euro was slightly up against the USA dollar to last trade at 1.1754, though the single currency has plunged from the highs of 1.1909 achieved last week following reports showing a strong labor market in the US.
Oil prices edged higher after a report showed USA refineries processed record amounts of crude in the latest week, eating into inventories, although a surprise jump in gasoline stockpiles limited gains.
CURRENCY: The dollar declined to 109.79 yen from Tuesday’s 110.34 yen.
Platinum climbed 0.2 percent to $978.00 per ounce after touching $984.60 during the session, its highest since April 18. Britain’s FTSE 100 added 0.1 percent.
ASIA’S DAY: Japan’s benchmark Nikkei 225 inched down less than 0.1 percent to finish at 19,729.74. The Shanghai Composite slipped 0.4 percent to 3,261.75.