Stocks ended more than one per cent down in Seoul while the won slumped to a three-week low against the dollar as the United States president and South Korea's volatile neighbour dramatically ramped up their war of words.
"Geopolitics splashed cold water on the markets", said JJ Kinahan, chief strategist at TD Ameritrade. The Russell 2000 index of smaller-company stocks gave up 4.02 points, or 0.3 percent, to 1,410.15.
U.S. President Donald Trump's warning to North Korea and Pyongyang's threat of possible armed retaliation drove investors out of stocks and other risky assets on Wednesday and into textbook safe-havens like gold and Treasuries.
The MSCI Asia Pacific Index has rallied 19 per cent so far this year, last week posting its highest close since 2007 amid strong earnings from some of the region's key companies and optimism U.S. interest rate increases will remain gradual.
The market indexes wavered between small gains and losses for much of the morning, then veered lower by afternoon.
The remarks followed a new report asserting that USA intelligence has assessed that Pyongyang has successfully produced a nuclear warhead that can fit inside its missiles.
The Nasdaq composite lost 18.13 points, or 0.3 percent, to 6,352.33.
The stage was set for the USA indexes to go lower early Wednesday as investors around the world reacted to the rising war of words between the US and North Korea, pushing global market indexes lower.
A man looks at a stock quotation board flashing the Nikkei 225 key index of the Tokyo Stock Exchange in front of a securities company in Tokyo.
Spot gold XAU= added 0.1 percent to $1,261.71 an ounce, pulling away from the previous session's two-week lows.
Shares of Macy's tumbled 10.2 percent and Kohl's was down 6 percent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnaround may still be a long way off.
The euro was 0.18 percent lower against the greenback but remains the best-performing G10 currency so far this year with gains of more than 11 percent against the dollar.
Benchmark U.S. 10-year notes were last up rose 11/32 in price to yield 2.2423 percent, from 2.282 percent late on Tuesday. USA crude CLc1 shed 10 cents to $49.07 a barrel. The NYSE Arca Biotechnology Index plunged by 3.4 percent to its lowest closing level in well over a month. Oil prices were headed higher.
The dollar was steady at 110.005 yen after going as low as 109.560 overnight, its weakest in eight weeks. On Tuesday, the DAX added 0.3 percent, the CAC 40 gained 0.2 percent and the FTSE rose 0.1 percent. USA gold futures gained 1.50 percent to $1,281.50 an ounce.