Stocks on Wall Street added to earlier losses while U.S. government bond yields dropped after North Korea accused the United States of having declared war on the isolated country, while the euro fell after German elections showed support for Chancellor Angela Merkel's party fell to its lowest since 1949.

Separately, Brent oil futures touched a more than 2-year high after major producers said the global market was on track to rebalance and Turkey said it could cut off a pipeline that carries oil from northern Iraq to the global market.

On Wall Street, a selloff in tech stocks drove major indexes lower and equities fell further after the North Korean Foreign Minister said in a statement at the United Nations that U.S. President Donald Trump's tweets over the weekend were tantamount to a declaration of war.

"What is Trump going to do: is he going to escalate or will he rein it in? Everyone’s waiting with a cringe on their face," said Jason Ware, chief investment officer at Albion Financial in Salt lake City.

"We don’t want this to continue, to become a war of words, and then who knows when a mistake can happen... and there’s a lot of that chatter going on trading desks."

The White House spokeswoman said at a press briefing that the United States had not declared war on North Korea and to suggest that is "absurd."

U.S. stocks ended lower on Monday, as a selloff in technology shares weighed on the Nasdaq, while the latest statement from North Korea to Washington kept investors on edge.

Based on the latest available data, the Dow Jones Industrial Average fell 53.08 points, or 0.24 per cent, to 22,296.51, the S&P 500 lost 5.58 points, or 0.22 per cent, to 2,496.64 and the Nasdaq Composite dropped 56.33 points, or 0.88 per cent, to 6,370.59. 

The pan-European FTSEurofirst 300 index rose 0.23 per cent and MSCI's gauge of stocks across the globe shed 0.54 per cent.

A stronger U.S. dollar weighed on emerging market stocks, which lost 1.47 per cent, the most in over four months. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.31 per cent lower, while Japan's Nikkei rose 0.50 per cent.

EURO TUMBLES, OIL CLIMBS

Germany's Angela Merkel began the task of trying to build a government after securing a fourth term as chancellor, urging the centre-left Social Democrats not to shut the door on a re-run of their "grand coalition." The emergence of the pro-regulation Greens as power-brokers weighed on the euro and other financial markets.

"Markets don’t like uncertainty and the German election results have injected a healthy dose of (that)," said Richard Falkenhall, a strategist at SEB AB in Stockholm.

The dollar index rose 0.53 per cent, with the euro down 0.93 per cent to US$1.1841.

The Japanese yen strengthened 0.29 per cent versus the greenback at 111.66 per dollar, while Sterling was last trading at US$1.3469, down 0.16 per cent on the day.

The U.S. dollar also benefited from a New Zealand election which left the ruling National Party short of the necessary votes to rule without forming a coalition. The greenback gained 0.8 per cent to the kiwi.

Brent crude touched its highest since July 2015 after major producers said the global market was on track to rebalance and Turkey said it could cut off a pipeline that carries oil from northern Iraq to the global market, putting more pressure on the Kurdish autonomous region over its independence referendum.

"If this boycott call proves successful, a good 500,000 fewer barrels of crude oil per day would reach the market," Commerzbank said in a note.

U.S. crude rose 2.92 per cent to $52.14 per barrel and Brent was last at US$58.36, up 3.44 per cent on the day.

Safe-haven demand drove U.S. Treasury yields to session lows after the North Korean foreign minister's remarks at the UN. He said Pyongyang reserves the right to take countermeasures.

Benchmark 10-year notes last rose 11/32 in price to yield 2.2233 per cent, from 2.262 per cent late on Friday.

The 30-year bond last rose 20/32 in price to yield 2.7654 per cent, from 2.796 per cent late on Friday.

Spot gold added 0.9 per cent to US$1,308.11 an ounce. U.S. gold futures gained 1.09 per cent to US$1,311.70 an ounce.

Copper rose 0.09 per cent to US$6,462.50 a tonne.