Political Risk Analysis - Regional Tensions To Remain Elevated Following H-Bomb Test - NOV 2017


BMI View: North Korea ' s hydrogen bomb test on September 3 has raised tensions across the Korean Peninsula and is in clear defiance of US President Donald Trump's warnings as well as international condemnation of the August 29 missile overflight of Japan. We expect tensions to persist as Pyongyang is determined to perfect its intercontinental nuclear missile capabilities and will not give up its arsenal, but could eventually agree to a freeze in return for diplomatic and economic incentives from Washington.

Tensions have once again flared up on the Korean Peninsula following North Korea's hydrogen bomb test on September 3 and we expect bilateral and regional tensions to persist over the foreseeable future. While it is likely that the world will respond with greater sanctions, these will yield limited results and China is likely to step in to prevent the international community from taking overly harsh measures on Pyongyang. We also cannot rule out the possibility that the US will take some form of military action over the longer term in response to growing pressure. In addition, the growing nuclear threat from the North could see South Korea seek to adopt a harder line against its neighbour, with Seoul looking to extend its nuclear missile ranges. However, we believe that these measures will not deter Pyongyang, but it could eventually agree to a freeze in return for diplomatic and economic incentives from Washington.

Hydrogen Bomb Test Raises Stakes Again

A Barometer Of Crisis
South Korea - Victek Share Price (KRW)
Source: BMI, Bloomberg

This article is part of our Global Macro Monitor coverage. To access this article subscribe now or sign up for free trial