"The war of words taking place between the U.S. and North Korea at the moment, which includes very real threats of action, is taking its toll on investor sentiment".
The Swiss franc and the yen had notched up impressive gains against the dollar on Wednesday after US President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States.
The FTSE 100 Index closed down 79.98 points to 7,309.96, with President Donald Trump tweeting that the United States military is "locked and loaded" as he warned North Korea over its continuing threats. Energy stocks fell along with crude prices as investors kept an eye on the latest company earnings and geopolitical news.
David Madden, market analyst at CMC Markets, said: "Stock markets in Europe are still feeling the pressure from the tension surrounding North Korea".
Tokyo's Nikkei 225 tumbled 1.3 percent to 19,737.59 points and Seoul's Kospi fell 0.7 percent to 2,378.56.
The North Korea situation isn't the only thing weighing on stocks.
A slight rise in a measure of USA consumer prices pointed to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year, which would be favourable to equity investors. The news drove investors out of risky assets and into safe-haven assets like gold, U.S. Treasurys and the Japanese Yen.
The latest US CPI data will also be an important market focus on Friday and there will be a constant threat of choppy trading conditions given a lack of liquidity.
North Korea appears more emboldened than ever, and, due to years of failed American foreign policy, it is closer than ever to possessing the weapons to finally put some bite behind its bark.
Against the pound, the euro managed to gain margially, rising 0.06% to 0.9047.
The dollar was down 0.53% against the yen at 109.48 yen, after briefly dropping as low as 109.53. The Shanghai Composite Index fell 0.2% to 3275.57 points.
"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY. In bond markets, 10-year US Treasuries and Germany's ultra-safe government bonds were trading at their highest prices since June.
The price of crude oil dropped more than two percent Thursday, the cost of a barrel falling to $48.49.