Trump warned North Korea again on Thursday not to strike Guam or United States allies, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.
Markets were also lower in Europe and Asia.
We will get a gauge of consumer confidence for August from Westpac and the Melbourne Institute.
Markets had seen a tentative recovery in risk appetite in USA and early Asian trading, but as the war of words resumed Asian stocks dropped back and London, Frankfurt and Paris all lost 0.5-1.2 percent.
The Nikkei dropped 1.3 percent to 19,738.71, the weakest closing level since May 31, but defence equipment makers attracted buyers, with Ishikawa Seisakusho soaring 5.0 percent, Howa Machinery rising 1.1 percent and Tokyo Keiki advancing 1.4 percent.
Nitesh Shah, director and commodities strategist at ETF Securities, said Trump's latest comments of "fire and fury" had "made the world nervous about the threat of nuclear war". The remarks, following North Korea's earlier revelation of a plan to launch a salvo of ballistic missiles toward the U.S. Pacific territory of Guam, gave investors a reason to pocket profit in the sectors, such as technology, that have been the biggest gainers in recent months, analysts said.
The 30-year bond last rose 28/32 in price to yield 2.7759 percent, from 2.818 percent late on Wednesday.
Gold demand in India remained sluggish this week as local prices jumped to their highest level in almost three months and a rally in global prices of the precious metal dampened fresh buying elsewhere in Asia.
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.
"It's just a classic risk-off day", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY. Advanced Micro Devices gave up 62 cents, or 4.8 percent, to $12.22. The precious metal is usually seen as a safe port in times of geopolitical uncertainty.
The index fell to 2,321.04 at one point, the lowest since May 24. USA -traded Nikkei futures fell 2 percent to their lowest since mid-May.
ENERGY: Benchmark U.S. crude gained 1 cent to $49.57 a barrel in electronic trading on the New York Mercantile Exchange.
European equities are set to open lower on Wednesday as geopolitical concerns curbed investor sentiment.
The euro was down 0.4 percent at just over $1.17 and nearing a two-week low, while the New Zealand dollar tumbled a full 1 percent as its central bank head bluntly said he wanted it lower.