The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the election.
"Although it is considered highly unlikely that this tension will escalate into a nuclear war, the market still needs to see how President Trump will eventually deal with his advocating "fire and fury" against North Korea's threat", said Margaret Yang Yan, market analyst at CMC Markets Singapore.
A weaker-than-expected July consumer price data also supported the recovery.
"North Korea responding with a threat to USA territory after Trump warned [it] not to threaten the United States was never going to go down well".
Despite the ongoing turmoil, investors' focus was slowly returning to the USA economy after Chicago Federal Reserve president Charles Evans said Wednesday it would be "reasonable" to announce the beginning of a reduction of the Fed's balance sheet next month.
ASIA'S DAY: South Korea's Kospi sank 1.7 percent to 2,319.71 and Hong Kong's Hang Seng lost 2 percent to 26,883.51.
USA stocks closed slightly lower Wednesday, making up much of the ground they lost earlier following a rare batch of earnings disappointments by Walt Disney and other big companies. United States gold futures for December delivery rose 0.5% to $1,285 per ounce.
Swiss franc eases slightly after spiking on North Korea tensions
Elsewhere, the retreat by the New Zealand dollar continued, with the kiwi hovering near a three-week low of $0.7319. The data comes amid tepid inflation that has remained below the Fed's 2 percent target, despite low unemployment.
Mr Trump's comments also sparked a late afternoon selling on Tuesday, with the Dow ending a nine-day streak of closing records.
The dollar weakened after news that US producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.
(Employees push a trolley laden with crates of one kilogram gold bars at the YLG Bullion International Co. headquarters in Bangkok, Thailand.Getty Images/Dario Pignatelli/Bloomberg) Gold has rallied 2.3% this week on the heels of renewed tension with North Korea.
The Dow Jones Industrial Average closed down 204.69 points, or 0.93 per cent, at 21,844.01, the S&P 500 lost 35.81 points, or 1.45 per cent, to end the session at 2,438.21 and the Nasdaq Composite fell 135.46 points, or 2.13 per cent, to 6,216.87.
The euro slid 0.6 percent to 128.92 yen, and fell 0.1 percent against the dollar to $1.1735.
An index of 15 gold miners tracked by Bloomberg Intelligence climbed 1.1 percent, led by Toronto-based Yamana Gold Inc. The low rates have been in recent years one of the fuels of the stock market.
The Standard & Poor's 500 index fell 0.2 percent, to 2,474.92.
Retailers Wal-Mart (WMT), Home Depot (HD), Target (TGT), Staples (SPLS), and Gap (GPS) are also among the companies due to report their quarterly results next week.