The threat followed U.S. President Donald Trump's warning on Tuesday that any threats by Pyongyang would be "met with fire and fury like the world has never seen".
"There's not a great incentive to buy big", said Lerner of SunTrust Advisory.
The technology sector .SPLRCT was the S&P's biggest drag with a 2.2 per cent drop.
MSCI's main index of Asia-Pacific shares, excluding Japan, was last down 0.6%.
South Korea's Kospi sank 1.8 percent to 2,316.88 and Hong Kong's Hang Seng shed 1.5 percent to 27,041.83.
Markets had seen a tentative recovery in risk appetite in United States and early Asian trading, but as the war of words resumed Asian stocks dropped back and London, Frankfurt and Paris all lost 0.5 to 1.2 per cent.
He said the crisis provided a "perfect trigger" for a correction at a time when many markets - including the FTSE 100 - were at or around record highs, leaving them vulnerable to a sell-off if investors think it is time to take profits. A settlement around this level would be the highest since June 7, according to FactSet data. On Thursday, the S&P 500 started the day with weaker sentiment and closed the day below the support level of 2,450. The Shanghai Composite slipped 0.4 percent to 3,261.75.
There have been some markets which have benefitted from the US-North Korean sabre rattling.
Robert Phipps, a director at Per Stirling Capital Management in Austin, said he was reassured after Dallas Fed President Rob Kaplan said the Fed needs evidence of progress toward its inflation goal before raising rates.
Josh Saul, chief executive officer of London-based The Pure Gold Company, which is among the bullion merchants reporting incremental trading, said: "We've seen a 64% increase in people purchasing physical gold for the first time in recent sessions citing the breakdown of global relations".
The dollar was down 0.53% against the yen at 109.48 yen, after briefly dropping as low as 109.53.
Concerns over geopolitical risks probably led investors to pare back bearish bets against the yen and the Swiss franc, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, referring to the gains in those currencies on Wednesday.
The selling in the US extended to global markets Friday.
Gold got an extra boost after data showed USA consumer prices rose less than expected in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year.
The benchmark U.S. yield on Thursday was just above 2.2%, at its lowest level since late June, as investors bought up Treasuries, a classic safe harbour.
Instead, investors headed for safe havens, such as gold, which gained as much as 1.2% - a near two-month high - in Wednesday trading.
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