The broader All Ordinaries index was down 67.1 points, or 1.15 per cent, at 5,743.5 points. Were the situation to escalate, much more than the stock markets would be at risk.
Shaun Osborn from Scotiabank said, "The yen is the big story really".
"What has changed this time is that the scary threats and war of words between the USA and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney. The Dow Jones industrial average slid 204.69 points, or 0.9 percent, to 21,844.01, just shy of its low point for the day.
J.C. Penney (JCP.N) finished down 16.6 percent after hitting a record low following the retailer's bigger-than-expected quarterly loss.
The Standard & Poor's 500 index fell 5.99 points, or 0.2 percent, to 2,474.92.
Alvaro Morata scores his first goal for Chelsea in defeat to Burnley
To take over a team 11th in the top flight the year before and comfortably win the title was a fantastic achievement. They've already got off to a good start with a 1-0 win in the Europa League.
The tech-heavy Nasdaq composite bore the brunt of the sell-off, losing 135.46 points, or 2.1 percent, to 6,216.87.
The report said labor productivity climbed by 0.9 percent in the second quarter after inching up by a revised 0.1 percent in the first quarter.
Gold-related stocks were well-supported with Newcrest Mining up 2.1 per cent at $21.85 and Evolution Mining up 2.2 per cent to $2.34.
Oil prices closed lower after an early rally faded.
ENERGY: Benchmark U.S. crude added 28 cents to $49.45 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price worldwide oils, added 26 cents to $52.96. Wholesale gasoline dropped 2 cents to $1.60 a gallon, while heating oil shed 2 cents to $1.63 a gallon.
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.
Jose Mourinho insists Manchester United's transfer activity is sufficient
The Portuguese coach concedes his squad is "similar" to the one he took charge of last season . What we had was midfielders, wingers, scoring, central defenders scoring goals at set pieces.
REA Group shares fell $4.07 cents, or almost six per cent, to $64.35 after its full-year net profit slipped 19 per cent to $206.3 million.
Disappointing economic data releases weighed on both sides of the Atlantic today with a negative goods trade balance for the United Kingdom (-0.1% versus expectations of 1.4%), higher unemployment claims from the USA (244,000) and also a negative month-on-month PPI figure for the U.S. (-0.1%).
Looking at the yen, overnight trading was fairly subdued with a 109.89/110.16 range taking hold. Tokyo's Nikkei 225 tumbled 1.3 percent to 19,738.71 while Seoul's Kospi fell 1.1 percent to 2,368.39.
In Europe, Germany's DAX fell 1.1 percent, while the CAC 40 in France lost 0.6 percent.
But the S&P Bank sub-sector.SPXBK fell 0.7 percent on dimming prospects of another rate hike this year since higher rates tend to boost bank profits. The 1.3 percent gain for the market's main other choice for borrowing to fund speculation, the Swiss franc against the euro, is its biggest rise in more than a year.
Alexis Sanchez to miss start of season through injury
"He had a little abdominal strain that he caught on Sunday morning in training, before he came to Wembley", Wenger said. You need a combination of talent and attitude and he looks to me as if he has both. "I have had no contact with PSG".