Trump warned Russia of imminent military action in Syria, declaring that missiles "will be coming" despite a warning from Russia that any U.S. missiles fired at Syria over the deadly assault on a rebel enclave near Damascus would be shot down and the launch sites targeted.
The animosity kept investors on edge and weighed on risky assets like stocks, while the safe-haven yen rose against the U.S. dollar.
"There's general nervousness about what might happen with any strikes and the potential escalation of tensions with Russia," said Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments in Boston.
The Dow Jones Industrial Average fell 218.55 points, or 0.9 percent, to 24,189.45, the S&P 500 lost 14.68 points, or 0.55 percent, to 2,642.19 and the Nasdaq Composite added 8.66 points, or 0.12 percent, to 7,102.96.
The pan-European FTSEurofirst 300 index lost 0.60 percent and MSCI's gauge of stocks across the globe shed 0.32 percent.
Emerging market stocks rose 0.02 percent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.06 percent higher, while Japan's Nikkei lost 0.49 percent.
The U.S. Federal Reserve is worried about trade tensions with China, but minutes from the most recent Fed meeting suggest those concerns have not translated into worry about the overall economy - or a more complacent monetary policy.
"The minutes were modestly negative," said John Carey, portfolio manager at Amundi Pioneer Asset Management in Boston. "People had been speculating that due to all the turbulence in the market because of geopolitical uncertainties that the Fed might consider pausing or slowing down the interest rate increases."
Oil prices hit their highest in more than three years despite a surprise build in U.S. crude inventories as investors fretted over conflict escalation in the Middle East. [nL3N1RO18E]
"A bearish inventory report was quickly negated on word of intercepted rockets over Riyadh, which just adds to the recent spike in geopolitical tensions," said Anthony Headrick, energy market analyst and commodities futures broker at CHS Hedging LLC.
U.S. crude rose 1.89 percent to $66.75 per barrel and Brent was last at $71.89, up 1.2 percent on the day.
Oil prices began to climb on Trump's warning over Syria, then rallied further on a report that Saudi Arabia's air defence forces intercepted a missile over Riyadh, the capital.
The dollar fell against the yen as escalating geopolitical concerns added to lingering worries over U.S. trade policy and domestic scandals swirling around Trump.
"It's a risk-off kind of day," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California, referring to increased geopolitical tensions.
"The yen typically is a flight to safety," Trang noted.
The dollar index fell 0.07 percent, with the euro up 0.1 percent to $1.2366. [GVD]
The Japanese yen strengthened 0.39 percent versus the greenback at 106.80 per dollar, while Sterling was last trading at $1.4177, up 0.04 percent on the day.
The Russian ruble slumped as much as 3.2 percent against the dollar before rising 1.0 percent after two days of steep losses.
In metals, aluminium prices extended their rally to a sixth straight session, hitting an 11-week peak amid persistent worry about shortages after the United States imposed sanctions on Russia's Rusal.
Spot gold added 1.1 percent to $1,353.16 an ounce. U.S. gold futures gained 0.80 percent to $1,356.70 an ounce as safe-haven demand sharpened.
U.S. Treasury yields edged lower with bond prices higher on the escalating geopolitical tensions. Benchmark 10-year notes last rose 5/32 in price to yield 2.7808 percent, from 2.797 percent late on Tuesday.
(Reporting by Laila Kearney and Rodrigo Campos; Additional reporting by April Joyner, Gertrude Chavez-Dreyfuss, Jessica Resnick-Ault and Saqib Iqbal Ahmed in New York; Editing by David Gregorio and Dan Grebler)
By Laila Kearney and Rodrigo Campos
