China's claims to offshore resources in most of the South China Sea, just one of the issues prompting investor caution on Tuesday (July 14).
Tensions grew after Washington rejected Beijing's disputed claims to the region.
The Trump Administration also plans to scrap a 2013 auditing agreement that could indicate a broader crackdown on U.S.-listed Chinese firms.
Stocks slipped, oil sagged and a safety bid supported the dollar.
Optimism was also capped by new lockdowns in California just as earnings season gets underway.
MSCI's All-Country World Index edged down 0.4%, after touching a 20-week high on Monday (July 13).
The pan-European STOXX 600 fell 1.3%, with technology stocks dropping 3.2%, on course for their biggest one-day selloff in over a month.
Software giant SAP was one of the biggest drags on the index, down over 4 percent.
One gainer though was German meal-kit delivery firm Hellofresh.
It added as much as 4.3% as it raised its full-year revenue forecast.
Chinese stocks were down despite better-than-expected trade numbers.
Global infections have surged by a million in five days, and top 13 million.
Oil prices reflected concerns over that.
New restrictions could threaten a recovery in fuel demand just as OPEC+ producers prepare to increase output from August.
U.S crude futures fell as much as 1.5% before regaining some ground.