This marked a hardening of tone from the Trump administration, which has been reluctant to blame ally Saudi Arabia, despite mounting evidence that Saudi agents killed and dismembered Khashoggi inside the Saudi consulate in Istanbul more than two weeks ago.
A former regime insider, Khashoggi had become a critic of powerful Crown Prince Mohammed bin Salman, the point man in ever-tightening military and commercial relations between the Muslim petro-state and the Trump administration.
Just hours earlier Secretary of State Mike Pompeo said he had told Trump the Saudis should be given "a few more days to complete" an investigation.
Only then, Pompeo said, "we can make decisions how or if the United States should respond."
Four prominent human rights and press freedom groups on Thursday urged Turkey to request a United Nations investigation to prevent a "whitewash" of the alleged crime.
The Committee to Protect Journalists, Human Rights Watch, Amnesty International and Reporters Without Borders said such a probe established by UN Secretary-General Antonio Guterres would finally clear up the affair.
But the United States, the Saudis' most powerful patron, has repeatedly given the Saudi royals the benefit of the doubt, with Trump and top officials stressing that the US-Saudi relationship cannot be put at risk.
Trump has repeatedly praised massive Saudi arms purchases, while Pompeo used much of his brief remarks on Thursday to recall Washington's "long strategic relationship with the kingdom of Saudi Arabia." The Saudis "continue to be an important counter-terrorism partner, they have custody of the two holy sites... We need to be mindful of that as well," he said.
The furor has also blown a hole in next week's Future Investment Initiative conference in Riyadh, which was meant to showcase Prince Mohammed's plans for modernizing the desert kingdom.
US Treasury Secretary Steven Mnuchin said he was pulling out, joining senior ministers from Britain, France and the Netherlands, as well as a string of corporate leaders.
Mnuchin's announcement on Twitter helped push down stock prices on Wall Street.
His withdrawal "raises worry that the administration is being pushed to take a harder line against Saudi Arabia over the Khashoggi murder and there could be retaliation," said Karl Haeling of LBBW.
Responses from Saudi Arabia could include selling US Treasuries, or punishing US companies seeking business in the kingdom, Haeling said.
Most analysts don't think Saudi Arabia would cut off oil supplies. Oil prices were off modestly at midday.
Russian President Vladimir Putin, meanwhile, took a dig at Washington, saying that "the US holds a certain responsibility over what happened to him." But he said Moscow would not "start deteriorating relations" with Saudi Arabia as long as "it did not know what really happened."
Neither Turkey nor the United States has publicly confirmed that Khashoggi is dead or said officially that Riyadh is to blame.
But a steady stream of unconfirmed leaks from officials to Turkish media have painted a detailed and horrifying picture of Khashoggi's last minutes, allegedly at the hands of 15 Saudi agents waiting for him when he came to the consulate for paperwork.
The pro-government Yeni Safak newspaper on Wednesday claimed it had heard audio tapes in which Khashoggi's alleged killers tortured him by cutting his fingers off before his decapitation.
The pro-government Sabah newspaper on Thursday said Saudi security official Maher Abdulaziz Mutreb, believed to be close to the crown prince, was the leader of the operation.
"Here is the head of the execution team," said Sabah's headline, and the paper then detailed Mutreb's movements on the day Khashoggi went missing.
Giving precise times based on CCTV footage, the newspaper reported that Mutreb went into the consulate more than three hours before Khashoggi entered the building.
In a series of CCTV images, Mutreb was then seen outside the consul's residence, then later at his hotel near the Saudi mission with a "large suitcase," and finally at the airport in the early evening.
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