US equities steepened their losses late in the session after President Donald Trump said his earlier warnings to North Korea may not have been tough enough.
Traders across the globe reacted with dismay to Trump's warning Thursday that his earlier threat to unleash "fire and fury" on the reclusive nuclear-armed state may not have been "tough enough".
The CBOE Volatility Index .VIX , a barometer of expected near-term stock market volatility, closed at its highest since the election.
Investors' unease over escalating tensions between the USA and North Korea had weighed on stocks earlier in the day, pushing gold and bond prices slightly higher. The Dow Jones Industrial Average .dji fell 204.69 points, or 0.93 percent, to close at 21,844.01, the S&P 500 .spx lost 35.81 points, or 1.45 percent, to 2,438.21 and the Nasdaq Composite .ixic dropped 135.46 points, or 2.13 percent, to 6,216.87.
Pyongyang said it was examining plans for attacking Guam, a US territory in the Pacific with a military base.
The Swiss franc reversed a two-week losing streak and gained 1.1 percent to as firm as 0.9611 per dollar. Prices earlier rose to $1,282.40 per ounce, the highest since June 14.
INFLATION: The Labor Department said consumer prices edged up 0.1 percent in July following no gain in June.
S&P 500 e-mini futures were down 0.2 percent, hinting at weakness on Wall Street later in the day.
In Europe, the pan-continental STOXX 600 index fell 0.9 percent, with falls deepening after a vehicle rammed a group of soldiers in Paris, injuring six, in what officials said was a suspected terrorist attack.
The Swiss franc eased versus the dollar on Thursday, but still held on to the bulk of hefty gains made the previous day as heightened tensions between the United States and North Korea sent investors looking for havens.
The South Korean won slipped 0.8% against the greenback, with one dollar buying 1,139.71 won on Wednesday morning. The index dropped to a one-month closing low.
Gold rose 0.6 percent to $1,268 an ounce. Hong Kong's Hang Seng was off 0.3 percent.
Macy's M.N shares closed down 10.2 per cent and Kohl's KSS.N 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.
USA crude shed 20 cents to $48.97 a barrel, while Brent crude fell 26 cents to $51.88 a barrel. TripAdvisor shares shed $2.70, or 6.8 percent, to $36.85.
CURRENCIES: The dollar fell to 109.96 yen from 110.48 yen late Tuesday.
Insurers and banks, which invest in higher-yielding products such as foreign bonds, underperformed after U.S. Treasury yields fell on Wednesday, with the yields on the benchmark 10-year note hitting a six-week low.
The index was also dragged lower after Beijing ordered probes into three major Chinese social networking platforms over outlawed content.