The following note from Dr Shane Oliver of AMP Capital takes a look at the risks around war with North Korea. The key points are as follows:

• Tensions with North Korea have clearly increased causing volatility in share markets.
• The risk of war with North Korea has grown but a diplomatic solution remains most likely although there could still be more volatility before this is finally achieved.
• Historically, shares have been adversely affected initially on the uncertainty of wars (or threatened wars) with a potential significant economic impact, but have tended to rally well before the conflict is over. 

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