When a regime as brutal, unpredictable and desperate as North Korea puts itself on a war footing and severs all ties with its bitter enemy to the South, then the world has every reason to be worried. Under the circumstances, a fall of just over 3% in the South Korean stock market sounds like a fairly moderate response.

The markets obviously think the risk of war is still fairly small. And I think – and hope – that the markets are right. The fact is that neither side has a real reason for wanting conflict. The North Korean government would risk a humiliating defeat and a loss of power. Unlike in the Korean War, it has no external backer to come to its rescue. South Korea is a rich, sophistictated society with a rising international profile – why should it risk all that, by being sucked into a conflict with its crazy neighbour to the North? Most South Koreans also have zero desire to shed the blood of their unfortunate compatriots. Read more

So Bill Clinton returns in triumph from North Korea, with two grateful female journalists for company on the flight home.

Naturally, there is lots of speculation about what lay behind the trip. Was the release of the imprisoned journalists really pre-arranged? Was Clinton’s mission purely humanitarian, or did he discuss other matters in his long meeting with Kim Jong-Il? Read more