"More likely than anything else, the price action was a function of an overextended USA equity market that has been in need for a healthy correction off record highs", LMAX Exchange analysts said in a morning note. Traders are also likely to take long gold positions over the week-end because of heightened uncertainty and risk.
The pan-European FTSEurofirst 300 index lost 1.19 percent.
Falls were also seen on Wall Street, with the Dow Jones Industrial Average down 0.5% about 15 minutes into trading and the Nasdaq tumbling by 0.6%. Earlier, the average had been down more than 88 points.
After a dip of as much as 0.52 percent earlier in the day, Wall Street's three major indexes bounced off intraday lows.
News that USA producer prices unexpectedly fell in July earlier helped send the United States dollar lower.
The most traditional safe havens at times of mounting geopolitical unrest are the Swiss franc and gold, and both were big movers on Wednesday. But the moves were modest. The Russell 2000 index gave up 1.7 percent to 1,372.54. "For now, the North Korea situation bears watching as there's lots of tough talk, but we'll see if it escalates", said Kinahan.
Beyond geopolitical concerns, investors continued to size up company earnings reports. Despite the losses, Noble shares rose 17.14 percent.
According to analyst Simona Gambarini, the price of gold "tends to rise in anticipation of a conflict but often falls when tensions turn into a full-blown war".
Office Depot tumbled 23.57 percent after the office supplies retailer's quarterly results came in below estimates. The company booked a hefty charge and said its CFO is leaving the company.
Health care equipment and services company Henry Schein declined amid a broader slide by health care stocks.
The data comes amid tepid inflation that has remained below the Fed's 2 percent target, despite low unemployment.
The euro, which hit its highest since the start of 2015 on August 2, dipped 0.1 percent to $1.1761 in morning trade in Europe. On the Nasdaq, 1,881 issues fell and 795 advanced.
Hong Kong was down 1.1%.
The December gold contract was ahead US$16.70 to US$1,279.30 an ounce. Fresnillo plc was the biggest gainer on the FTSE 100, rising by 5%, followed by Randgold Resources Ltd, which was up 2.9%.
The Yen gained further ground against the US Dollar during trading on Friday, with the USDJPY dipping below 109.00 for the first time since mid-June. Euro zone blue chips slipped 1.1pc. Get twice-daily updates on what the St. Louis business community is talking about.