"The North Korea situation is still unstable and investors are controlling risk and taking profit after recent gains", said Sam Chi Yung, a Hong Kong-based strategist at South China Financial Holdings.
"While not necessary unexpected - as the U.S. had to respond to threats made by North Korea that they will fire rockets due to land just off the coast of Guam soon - new comments by Trump propelled stocks lower".
North Korea said it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific island territory of Guam in an unusually detailed threat.
North Korea responded with a statement by its official KCNA news agency claiming Trump is "driving" the Korean peninsula to the "brink of a nuclear war".
The European dip followed similar trading in Asia, where equities were back in the red, snuffing out a nascent recovery as tensions over North Korea lingered for a second day. "Hopefully Kim Jong Un will find another path!"
Data showed USA producer prices unexpectedly fell in July, recording their biggest drop in almost a year, while another set showed the number of Americans filing for unemployment benefits unexpectedly rose last week.
The Labour Department said that its Consumer Price Index inched up 0.1% last month, pointing to subdued inflation which could make Federal Reserve policy makers cautious regarding another interest rate hike in 2017. Economists had expected prices to rise by 0.2 percent.
Strong gains in NY, where the Dow saw repeated record highs up until three day ago, had kept investor optimism high when news of the conflict first broke, Currie said.
A weaker-than-expected July consumer price data also supported the recovery.
Still, the S&P 500 is on track to post its biggest weekly loss in about nine months.
The major averages ended the session just off their worst levels of the day.
The Dow Jones industrial average fell 0.93 percent, with the tech-heavy Nasdaq composite index declining 2.13 percent.
The rhetoric, which began late Tuesday and continued into Friday, interrupted stocks' march higher and cracked the calm that has enveloped the market for months. Financials fell the most, down about 1 percent. The Japanese markets were closed for a holiday.
U.K.'s FTSE 100, the German DAX and the French CAC 40 all dropped more than 2.3% this week.
The Canadian dollar was trading at 78.64 cents United States, down from an average price of 78.71 cents U.S. on Wednesday.
The pound was down 0.09% against the euro at 1.1049 and down nearly 0.2% on the dollar at 1.2978.