Phew: S&P says conflict between Korea and North Korea is "unlikely"

 
Emma Haslett
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Conflict: Unlikely. Smiling and pointing at things: Highly likely. (Source: Getty)

Half the world may be practising its nuclear bomb drills as Donald Trump and Kim Jong-Un trade insults, but one credit ratings agency seems sanguine, after it said conflict on the Korean Peninsula is "unlikely".

In a note today Standard & Poor's (S&P) affirmed Korea's AA long-term rating and A-1+ short-term rating, saying the risk of armed conflict "remains remote".

[North Korea] appears to have achieved significant improvements in its weapons technology in the past few months. Nevertheless, we view the likelihood of the North Korean regime provoking a major armed conflict on the peninsula to be low.

This is based on our opinion that such an event would very likely destabilise North Korea politically and bring no benefit to the country.

But S&P's analysts also sounded a note of caution, saying although North Korea's ruling elite has a "strong sense of self-preservation", the risk of a conflict has risen.

"After ratcheting up tensions with little to show for it, the regime could underestimate the risks of a more dramatic provocation in the hope of winning some concessions," they said.

"On the other side, the US may be less patient in responding to North Korean provocations than before, now that it views the country as being close to achieving inter-continental nuclear strike capability. In this situation, a miscalculation by either side of this standoff could spark a direct military conflict."

Last week Paddy Power slashed odds on the world ending after tensions between Kim and Trump escalated (although at the time, it wasn't clear how winnings would be paid out).

The news pushed safe haven assets such as gold and the Swiss franc higher, and although the markets have appeared to calm down since their initial panic, gold jumped today, breaking $1,300 for the first time since November 2016.

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