The outbreak of military conflict on the Korean Peninsula would be destabilizing and could possibly result in a global war, according to Citi’s top global political analyst.
While it was impossible to put a number on the scale of the North Korea risk, war games carried out through history have simulated what could happen as a result, said Tina Fordham, managing director and chief global analyst at Citi.
“A conflict on the Korean Peninsula would not only be very disruptive in the region, but could potentially lead to World War III because of the U.S. security guarantee, so it would be internationalized overnight,” Fordham told CNBC’s “Street Signs” on the sidelines of the Milken Institute Asia Summit in Singapore.
North Korea carried out its sixth and most powerful nuclear test on Sept. 3, worsening already fraught U.S.-North Korea relations. In response, the United Nations Security Council voted to intensify sanctions, including imposing a limit on oil imports, against the hermit state.
While the duration and scope of such a conflict would be difficult to measure, North Korea remained an immense risk, Fordham said.
“It is the single biggest geopolitical threat and one that would also move markets … When we look at political risk, we look at whether it’s likely to cause an oil price shock or a growth shock. And in the North Korea case, if the worst were to happen, it would be both,” she added.