Many markets had already been at record or multi-year highs after an extended rally, leaving them vulnerable to a sell-off.
"The latest threats over North Korea have finally escalated to the point where market has been obliged to react", Ric Spooner, chief market analyst at CMC Markets, wrote in a note.
IG says futures indicate the FTSE 100 index is to open 39.64 points lower at 7,350.30.
The UK benchmark index has fallen deep into the red for a second day, staying on track for a hefty loss this week, pressured by the ongoing tension between the U.S. and North Korea which has fuelled a selloff in cyclical stocks.
"Tensions will continue to mount and could eventually develop into a "black swan" event that the markets are not prudently considering", Steve Hanke, professor of Applied Economics at the Johns Hopkins University, told the Reuters Global Markets Forum on Wednesday.
On Thursday, the CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the USA presidential election. The company has been fairly consistent in increasing production and said recently that it expected to achieve the top end of its production guidance for 2017. "Hard to assess political risk is now intruding on this scenario".
The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors there will repatriate funds should a crisis materialise.
Sterling was last trading at US$1.3005, up 0.12 per cent on the day.
Earlier, the dollar slipped as low as 108.91 yen, its weakest level since June 14, when the greenback fell as low as 108.81 yen.
"If he does something in Guam, it will be something the likes of which have never happened before in North Korea", he said, declaring his remarks "not a dare" but a statement and also warning against threats to USA allies Japan and South Korea. Inflation numbers surprised to the downside, leading the dollar to post considerable losses relative to other major currencies within the first minutes of data release.
The data comes amid tepid inflation that has remained below the Fed's 2 percent target, despite low unemployment.
Neil Mellor, a currency strategist with Bank of New York Mellon in London, said the pound was "drifting towards the lows from last month against the dollar".
Spot gold inched down 0.1% to $1,284.64 per ounce as of 11.46am, but was set for a weekly gain of over 2%.
The price of crude oil dropped more than two percent Thursday, the cost of a barrel falling to $48.49.
Meanwhile, the pan-European Stoxx 600 was on track for a greater than 2% loss for the week, its worst showing since November. Anglo American (LON:AAL) is now leading other blue-chip miners lower, having shed 4.22 percent to 1,223.50p.