U.S. and South Korean forces began their annual military exercise, which will involve computer simulations designed to prepare for war with a nuclear-capable North Korea.

About 17,500 U.S. troops and 50,000 South Korean troops are involved in the exercises, which will last for about 10 days.

The joint military drills come on the back of a ramp up in geopolitical tensions earlier this month after a heated exchange of rhetoric between President Donald Trump and Pyongyang.

South Korean President Moon Jae-in said the joint drills, called Ulchi Freedom Guardian, were purely defensive and did not aim to raise tensions on the peninsula.

Pyongyang warned that the upcoming exercises are “reckless behavior driving the situation into the uncontrollable phase of a nuclear war.”

The hermit state followed last year’s drills by launching missiles and carrying out its fifth nuclear test.

The dollar edged higher, but remained on the defensive following a White House-focused week that raised more questions about the Trump administration's ability to implement its pro-growth agenda.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up about 0.1% to 93.45 in early trade, not far from Friday’s low of 93.25.

Investors started to look ahead to this week's annual meeting of top central bankers and economists in Jackson Hole, Wyoming, where the heads of the U.S. and European central banks will be making keynote speeches.

Global stock markets started the week on the back foot as tensions between the U.S. and North Korea came back in focus.

Stock markets across Asia ended mostly in negative territory, with benchmarks in Tokyo, Seoul and Sydney falling amid thin trading volumes.

In Europe, shares were lower in mid-morning trade, with almost all sectors and major bourses in the red.

Meanwhile, U.S. stock futures pointed to a lower open on Wall Street, with the major benchmarks down between 0.2%-and-0.3%.

Oil prices drifted lower to start the week as concern over rising production in the U.S. dampened sentiment.

U.S. crude was about 0.2% lower at $48.55 a barrel, while global benchmark Brent slipped 0.5% to $52.48.

Data from the U.S. Energy Information Administration showed last week that total domestic crude production edged up by 79,000 barrels a day to 9.5 million barrels, its highest level since July 2015.

That comes despite data showing that U.S. energy firms cut rigs drilling for new oil for a second week in three.