And in bond markets, 10-year U.S. Treasuries and Germany's ultra-safe government bonds, known as Bunds, were trading at their highest prices since June.

"We do just not know what happens next with the North Korea situation," said BNY Mellon FX strategist Neil Mellor.

"For quite some time the market hasn't really reacted to things on the Korean Peninsula because we know from the past it is largely North Korean saber-rattling, and it may yet be. But with the rhetoric having gone to a different level, the market just can't afford to take that risk."

Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions over North Korea have proved the trigger.

The CBOE Volatility Index, the most widely followed barometer of expected near-term U.S. stock market volatility, hit its highest mark since Nov. 8, when Trump was elected president.

The Chinese volatility gauge jumped by the most since January 2016, to its highest level in more than seven months. The euro zone's version is at its highest since April, when France's election was rattling the region.