On Friday, an MSCI index of stocks across the globe posted its largest weekly drop since the week before Trump won the USA presidential election in November. He issued a new warning to Pyongyang, tweeting: "Military solutions are now fully in place, locked and loaded, should North Korea act unwisely".
President Donald Trump warned North Korea again on Thursday not to strike Guam or USA allies, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.
European markets also slid in early trade after Wall Street indices suffered their biggest losses in almost three months Thursday, while the dollar struggled to recover from eight-week lows below 109 yen as investors fled to safe haven assets.
The yen is perceived as a safe haven because Japan is the world's biggest creditor country and investors there have tended to repatriate funds in times of crisis.
The Swiss franc, the other traditional safety-play among currencies, has benefited too. They have soared over 2 percent in the previous two sessions, and are set for a weekly gain of 2.25 percent.
In bond markets, the yield on US 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 world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a selloff, and the tensions over North Korea have proved to be the trigger.
The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 per cent, hitting its highest versus the greenback in nearly four months, at 108.73 yen.
Wall Street swings lower on Trump's warning against North Korea
The Dow Jones was down 0.3% in opening trade, declining to 22,016.8 and the wider S&P 500 index dropped 0.48% to 2,463.18. Fear of military conflict helped to knock £40 billion off the value of London's stocks in three days, analysts said .
USA crude (CLc1) was unchanged at $48.59 per barrel and Brent (LCOc1) was last at $51.84, down 1.63 percent on the day.
The pan-European FTSEurofirst 300 index lost 1.01 percent and MSCI's gauge of stocks across the globe shed 0.26 percent for a weekly loss of 1.6 percent, the largest since the week to November 4. It is heading for a 2.5 percent drop for the week.
Emerging market stocks lost 1.27 percent.
The Korean won also continued to skid, down 0.45 percent to 1,147.2, falling below its 200-day moving average for the first time in a month.
The dollar index fell 0.32 percent, with the euro up 0.42 percent to $1.1819.
Crude futures extended losses on fears of slowing demand and lingering concerns over a global oversupply.
After touching a more than two-month high at US$1,291.86, spot gold last added 0.2 per cent to US$1,288.81 an ounce. Palladium added 0.4% to $899.80 per ounce and was on track to end the week about 2% higher.
The Korean won continued to fall versus the dollar, down 0.13 per cent to 1,143.5 on Friday for a 1.6 per cent decline on the week.
The dollar index (.DXY), which measures the USA currency against a basket of other major currencies, fell 0.14 percent. The Korea tensions though have seen both US and European markets this week push back expectations of when the Fed and ECB might hike interest rates.