Just hours after U.S. President Donald Trump told North Korea that any threat to the United States would be met with "fire and fury", a spokesman for the Korean People's Army said in a statement carried by the North's state-run KCNA news agency that it was considering a strike aimed at U.S. military bases on Guam.
MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1.55 percent, its biggest one-day loss since mid-December. Nvidia's shares shed more than 5% after the chip maker's revenue rose only 2% from the first quarter. Australia's S&P/ASX 200 dropped 1.2 percent, while Japan was closed on a public holiday.
Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions have proved the trigger.
USA stocks were on track for their biggest weekly loss in months, shaken by disappointing earnings results and an escalation of threats between the US and North Korea.
"Of course it's all come at a time when share markets are due for a correction so North Korea has provided a ideal trigger".
The euro slid 0.6 percent to 128.92 yen, and fell 0.1 percent against the dollar to $1.1735.
The Standard & Poor's 500 index rose 4 points, or 0.2 percent, to 2,442 as of 2:43 p.m.
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Spot gold inched down 0.1 percent to $1,284.64 per ounce as of 0616 GMT, but was set for a weekly gain of over 2 percent. According to the Associated Press, South Korea's Kospi lost 1.7 percent, while Hong Kong's Hang Seng slid 2 percent.
Buying interest may be somewhat subdued, however, as the ever-escalating war of words between President Donald Trump and North Korea continues to raise geopolitical concerns.
A day earlier, the Standard & Poor's 500 index posted its biggest single-day drop in almost three months following Trump's warning to unleash "fire and fury" if Pyongyang continued its nuclear weapons expansion. "You're less than 2 per cent off the high for the S&P heading into a weekend where uncertainty with North Korea still lingers".
If the U.S.is still trying to convince China to take significant action against the North Korean regime, however, Tracy says the Trump administration is using more stick than carrot.
The so-called fear gauge - the CBOE Volatility Index (VIX), the most widely followed barometer of expected U.S. stock market volatility, hit its highest since November 8, when Mr Trump was elected president.
The index was also dragged lower after Beijing ordered probes into three major Chinese social networking platforms over outlawed content. The settlement was the highest for a most-active contract since June 6.
Meanwhile, the U.S. dollar index has been surging since last Friday (August 4), when a better-than-expected United States jobs report boosted the greenback. Like gold silver has also seen a rise, reaching a high of $17.24, before finishing 1.1% up at $17.08. It was down 0.2 percent at 108.98 yen, after retreating 0.7 percent on Thursday.