The tech-heavy Nasdaq composite bore the brunt of the sell-off, losing 135.46 points, or 2.1 percent, to 6,216.87.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, while Japan's Nikkei lost 1.3 percent as the stronger yen sapped investor appetite.
Disappointing US inflation and jobs data have not helped the dollar.
Read:Few investors are excited about stocks. The risk-off tone triggered by the increase in tension between the USA and North Korea yesterday picked back up during today's U.S. session.
Escalating tensions around Pyongyang's nuclear ambitions sent a shiver through markets worldwide and pushed the dollar to below 109.7 yen in afternoon forex trade to an eight-week low against the safe haven currency, piling more pressure on Japanese stocks.
USA 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. The Dow Jones Industrial Average fell 0.93% and closed at 21,844.01. The S&P is looking at a decline of 1.3%, its worst week since March.
Still, the S&P and the Dow were on track to post their biggest weekly loss in about five months and the Nasdaq on course to post its biggest weekly fall in about six weeks.
The recovery fit a recent pattern of investors using dips to put more money in stocks.
"Obviously we are looking at the increased tensions between the U.S. and North Korea", said Brad Bechtel, managing director FX at Jefferies in NY.
The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the USA presidential election on Thursday, but was down 1.22 points at 14.82 points on Friday.
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. They outweighed gains in health care stocks and elsewhere. May 17 was the last time the three indexes had a bigger single-day decline.
The price of gold also surged for the second day in a row as the December bullion contract advanced US$10.80 to US$1,290.10 an ounce. Kinaxis shares fell after the supply chain management software maker cut its forecast.
"This inflation data for the month was not good".
The selling in the USA extended to global markets Friday.
But U.S. stocks regained some lost ground, despite Trump's comments Friday that U.S. weapons are "locked and loaded", ready to respond if North Korea acts "unwisely". Asian and American markets also struggled. Titled "Reckless game over the Korean Peninsula runs risk of real war", the editorial suggested China will stay neutral if North Korea strikes first, but will intervene if the U.S.is the first mover. On August 10, it rose 44.4% to 16.0.
Priceline sank 6.9 per cent as it projected third-quarter earnings below analyst expectations.
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