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North Korean tensions once again flared up after President Trump returned with his incendiary comments against the rouge nation. “Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid hasn’t worked, agreements violated before the ink was dry, makings fools of U.S. negotiators,” Trump said in a pair of tweets.

And now “only one thing will work!” This sparked off the possibility of military intervention against North Korea and its leader Kim Jong Un. In any case, several global leaders including Trump have long been vocal against North Korea’s antagonistic activities.

Following North Korea’s most powerful nuclear test on Sep 3, the 15-member Security Council voted on a U.S.-drafted resolution and slammed the nation with a new round of sanctions on Sep 18. Former North Korean partners Russia and China also supported the new oil imports limits.

The relation between Trump and North Korea soured so much that the latter’s foreign minister indicated in late September that a tweet by Trump was considered “as a declaration of war on North Korea” and that Pyongyang will not step behind to take counter actions, as per Reuters. If this was not enough, it is reported that North Korea has been fortifying defense on its east coast after U.S. Air Force B-1B bombers were flown to the Korean peninsula.

Pyongyang is also planning to test a long-range missile which is deemed to reach the west coast of the United States, a Russian lawmaker was quoted as saying, after a recent visit to North Korea.

Against this backdrop, below we highlight a few ETF strategies that investors might have to face if a war begins between North Korea and the United States.

Bet on Defense

The higher the tension between North Korea and the United States, the more gainful it will be for defense stocks and ETFs. Shares of Raytheon, Lockheed Martin and Northrop Grumman are likely to benefit if North Korea tension escalates. So, play ETFs like PowerShares Aerospace & Defense ETF (PPA - Free Report) and SPDR S&P Aerospace & Defense ETF (XAR - Free Report) (read: North Korea Jitters: ETF Winners and Losers).

Be Sure to See a Gold Rally

Gold is always viewed as a safe-haven asset. Such geopolitical risks are likely to spur safe-haven bids, which is why gold bullion may gain ahead. This makes SPDR Gold Shares (GLD - Free Report) and iShares Gold Trust (IAU - Free Report) good bets (read: 4 Strong Reasons to Buy Gold ETFs).

Get Ready for a Treasury Spike

U.S. Treasury yields, though on an uptrend on the Fed policy tightening speculation, may slip ahead on a safe-haven bid if any war takes place. This would benefit iShares 20+ Year Treasury Bond ETF (TLT - Free Report) .

Drive for Defensive ETFs

If volatility levels crop up, investors can target defensive ETFs like QuantShares U.S. Market Neut Anti-Beta (BTAL - Free Report) and AdvisorShares Ranger Equity Bear ETF (HDGE - Free Report) (read: 4 ETF Ways to Hedge Against Volatility).

Japan Investing May Come Under Pressure

Japan’s government, Prime Minister Shinzo Abe fully supports Trump on the North Korea issue.  Since two missile launches by North Korea were close to Japan, the country’s concerns are understandable. In September, a North Korean state agency threatened to “sink” Japan by using nuclear weapons. So, if violence intensifies ahead, Japan investing may feel some pressure.

Plus, if geo-political concerns rise, safe-haven currency yen should also gain traction. This would hurt Japan ETFs like iShares MSCI Japan ETF (EWJ - Free Report) as most of underlying companies have greater foreign exposure and thus underperform in a rising yen environment.

South Korea: Another Likely Loser

South Korea is also under Kin Jong-un’s rage. The South Korea government also ordered officials to get ready for likely new threats, such as biochemical attacks and electro-magnetic pulse. As per an article published on Bloomberg, a news research showed that a North Korea Nuclear attack on Tokyo and Seoul could kill 2.1 million people and injure 7.7 million. iShares MSCI South Korea Capped ETF (EWY - Free Report) thus may be hurt if a battle ensues (read: Can South Korea ETFs Continue Their Rally?).

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