Simmering tensions between the U.S. and North Korea have come back to the boil in recent days after Pyongyang disclosed plans to fire missiles over Japan to land near America's Pacific territory of Guam.
London's FTSE 100 dipped by about 90 points, or more than 1%, in morning trading on Friday, adding to a slump of more than 100 points the day before and taking it to its lowest level since May. Trump said that further threats would be met with "fire and fury like the world has never seen".
The Toronto Stock Exchange's S&P/TSX composite index was down 39.02 points to 15,217.33 in a broad-based decline that saw many sectors finish in the red while bullion stocks surged almost 1.9 per cent. Only utilities sector stocks eked out a gain on a day of mostly listless trading as investors kept an eye on the latest company earnings and geopolitical news. Non-OPEC production will get a health check later today when the Baker Hughes U.S. rig count is published at 1:00 p.m.
"When you have a market like we have had this year, and it has been amazingly calm, and you introduce a major source of uncertainty, there is bound to be some reaction", said Brad McMillan, chief investment officer for Commonwealth Financial.
North Korea responded to the threat with a warning of their own saying it was "carefully examining" the idea of a missile strike in Guam, a U.S. Pacific territory.
Gorka: Tillerson Comments Taken Out of Context
When we ran out of urban targets, we destroyed every hydroelectric and irrigation dam, flooding farmland and ruining crops. The ignorance of every single public figure regarding these facts is more risky than anything President Tweety may say.
The CBOE Volatility Index .VIX , the most widely followed barometer of expected near-term stock market volatility, rose to a near three-month high of 15.36. Its shares slid $9.77, or 5.3 percent, to $174.02.
Shares of Manulife, which reported better-than-expected results, fell after the company played down talk of a John Hancock spin-off.
Macy's shares closed down 10.2 per cent and Kohl's fell nearly 6 per cent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnarounds may still be a long way off. Wall Street was poised for a soft opening with S&P futures and Dow futures both down 0.2 percent.
In the United Kingdom, the stock of TV giant ITV was down 1.9 percent in early trading, and Sky shares were down 0.5 percent, while Germany's ProSiebenSat.1 fell 1.2 percent. The Nasdaq composite fell 45 points, or 0.7 percent, to 6,324.
Offsetting the declines was a 0.4 percent gain by the materials group, which includes gold producers.