Two weeks ago it saw its biggest weakly fall against the euro since the start of 2015.
Traders took heart in a measure of US consumer prices that increased only slightly in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year.
If the North Korean regime "does anything" to the United States or a U.S. ally "things will happen to them like they never thought possible", Trump told reporters on Thursday, according to Bloomberg.
The heightened rhetoric dragged London's top flight back from 7,542.73 on Tuesday, when it came within a whisker of reaching the all-time closing high of 7547.63 recorded on May 26 and June 2.
The CBOE Volatility Index, better known as the VIX and the most widely-followed barometer of expected near-term stock market volatility, closed at 10.96, its highest in about a month.
Emerging market stocks lost 1.28 percent.
Investors instead turned to safe-haven assets such as gold, pushing it to a two-month high, and the Japanese yen rose.
Tillerson's tone was in sharp contrast to that of USA president Donald Trump, who warned on Tuesday any North Korean threat to the United States would be met with "fire and fury".
"Investors have been anticipating that we are due a correction of some sort", said Paul Harper, European equity strategist at DNB.
Despite the past week's decline, the major indexes are in positive territory so far this year, led by the Nasdaq, which is up 16.2 percent.
Five of the 11 major S&P sectors were higher, with the leader technology index.SPLRCT up 0.4 percent. TripAdvisor shares shed $1.75, or 4.4 percent, to $37.80.
The falls followed USA and Asian market declines after North Korea said it was considering plans to attack Guam, which has a large US military base.
"This situation is beginning to develop into this generation's Cuban Missile crisis moment", ING's chief Asia economist Robert Carnell wrote in a note. US gold futures gained 0.26 percent to $1,293.50 an ounce.
Crude futures meanwhile extended losses on fears of slowing demand and lingering concerns over global oversupply. Brent crude, used to price worldwide oils, rose 20 cents to $52.10 a barrel in London.
Utilities closed up 0.3 percent while the materials sector was the S&P's biggest loser with a 0.9-percent drop.
The pan-European STOXX 600 was down 0.7% at closing, France's CAC 40 fell 1.4% after a vehicle hit a group of soldiers in Paris in what is thought to have been a deliberate act, and a fall in bond yields saw Germany's DAX down 1.1%. Copper, the bellwether industrial metal, was set for its first weekly drop in five weeks.
About 6.22 billion shares changed hands on USA stock exchanges, slightly above the 6.15 billion average for the last 20 sessions. The Korea tensions though have seen both USA and European markets this week push back expectations of when the Fed and ECB might hike interest rates.