Secretary of State Rex Tillerson later insisted the US isn't signalling it's about to mete out a military response despite threats from North Korea suggesting it could attack Guam, a USA island territory in the Pacific.
The MSCI World index dropped 1.1 percent overnight in its third straight day of declines and its biggest 1-day slide since May 17, as US President Donald Trump stepped up his rhetoric against North Korea.
"With European, U.S. and Asian markets all suffering heavily in anticipation of a potential conflict in Asia, it is worthwhile noting that we have heard similar posturing between Trump and Kim Jong Un before", said Mahony.
The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the election.
Global stock markets ended their worst week in months amid rising tensions between the USA and North Korea, though US stock indexes steadied on Friday to close up slightly.
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".
Stocks Make Comeback, but Haven't Fully Recovered From North Korea Selloff
Penney dropped 78 cents, or 17%, to $3.93 Friday after the department store's second-quarter loss exceeded expectations. The escalation provided an excuse for a selloff many investors consider overdue, some investors and analysts said.
South Korea's fell 1.7 percent to its lowest since May 24, but its losses for the week are a relatively modest 3.2 percent.
The Japanese yen hit an eight-week high against the US dollar, while spot gold also reached a two-month high.
In currency markets, the Canadian dollar was trading at an average price of 78.71 cents USA, down 0.20 of a USA cent.
The greenback also came under pressure after New York Federal Reserve President William Dudley cautioned it would "take some time" for U.S. inflation to reach the bank's two percent target, the latest warning price pressures remain muted.
The ongoing standoff between North Korea and America has seen gold rise to a two-month high.
The tension and severity of the potential consequences of further escalation have effected equities, thereby making the safe-haven of gold attractive to investors.
Asian markets lower amid US-North Korea tensions
In the eurozone, the Paris CAC 40 dropped nearly 0.7 per cent to 5,081.92 points compared with the closing level on Thursday. South Korea's benchmark Kospi index fell 1.69%, driven by losses in tech and retail stocks.
United States crude oil crude futures edged up 5 cents to $48.64 per barrel.
The S&P/TSX composite index was down 39.02 points to 15,217.33, with most sectors finishing in the red while bullion stocks surged almost 1.9 per cent. Hong Kong's Hang Seng Index plummeted 560.49 points or 2% to 26,883.51. But for the week the S&P 500 lost 1.3 percent, its worst weekly showing since March.
Priceline Group slumped 6.5 percent after issuing a profit forecast that was weaker than analysts were expecting.
Gold prices, which hit a two-month low on Thursday, were steady at $1,286.31 an ounce, after surging over 2 percent in the past two sessions.
Shares of Snap (SNAP) are also seeing pre-market weakness after the parent of Snapchat reported a wider than expected second quarter loss on revenues that came in below expectations.
Macy's shares closed down 10.2 percent and Kohl's fell nearly 6 percent 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.
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.