"European shares are. continuing their slide on the back of ever more increasing tensions between North Korea and the U.S.", added analyst Markus Huber at City of London Markets. The FTSE 100 index of leading British shares was 0.6 percent lower. Only utilities sector stocks eked out a gain on a day of mostly listless trading as investors kept an eye on the latest company earnings and geopolitical news. The Dow is down 98.98 points or 0.5 percent at 21,949.72, the Nasdaq is down 65.83 points or 1 percent at 6,286.50 and the S&P 500 is down 16.77 points or 0.7 percent at 2,457.25.
U.S. President Donald Trump ratcheted up his rhetoric toward North Korea on Thursday, saying the reclusive communist country should be "very, very nervous" if it even thinks about attacking the United States or its allies.
The FTSE 100 Index closed down 79.98 points to 7,309.96, with President Donald Trump tweeting that the U.S. military is "locked and loaded" as he warned North Korea over its continuing threats.
The latest sell-off was the most severe yet, amounting to the biggest single-day drop for the stock market in almost three months.
Selling was broad. Declining issues outnumbered advancing ones on the NYSE 6-to-1; on Nasdaq, a 3.60-to-1 ratio favoured decliners.
In currency markets, the Canadian dollar was trading at an average price of 78.71 cents USA, down 0.20 of a USA cent. Tokyo's Nikkei 225 tumbled 1.3 percent, while Seoul's Kospi fell 1.1 percent.
In oil, the price of Brent crude sunk by 0.5% to 51.65 U.S. dollars a barrel amid concerns about over supply in the market.
Damage for the week: The days of verbal sparring between Washington and Pyongyang looks set to bruise weekly performances for the major US indexes. "I don't see it as a fear-driven sell-off".
Separate ONS data showed that a pick-up in Britain's industrial output in June was marred by a slump in auto production, while construction output also fell.
The Labor Department said its producer price index for final demand edged down by 0.1 percent in July after inching up by 0.1 percent in June. It usually moves opposite to stocks' movements and rises when the S&P 500 falls. The stock lost $2.80 to $9.04.
Federal funds futures suggested the chance of rate hike in December fell to 40 percent from 42 percent shortly before the release of the data. Wholesale gasoline dropped 2 cents to $1.60 a gallon, while heating oil shed 2 cents to $1.63 a gallon.
The September crude contract was up 20 cents to US$49.76 per barrel and the September natural gas contract was up seven cents to US$2.95 per mmBTU.
The dollar fell to 109.85 yen from 110.48 yen late Tuesday. South Korea's KOSPI fell 1.8 percent to almost a three-month low.
Sterling was also down 0.1% versus the euro at 1.104.