Claims that North Korea has engaged in recent cyber-attacks could see the rogue nation ramp up military aggression next year, Nomura said.
Last week, the Federal Bureau of Investigation (FBI) announced that North Korea was behind a recent hacking at Sony Pictures, sparking expectations of U.S. retaliation against Pyongyang. Separately, following the FBI announcement, South Korea's nuclear plant operator announced a breach of its computer systems.
"Markets should be braced for a possibly protracted period, i.e. some weeks, of raised tensions around North Korea, which may trigger not only the usual rhetoric and missile launches by Pyongyang - as well as, possibly, the fourth nuclear test which has been threatened for some time now - but also potentially something (cyber or otherwise) more serious," said Alastair Newton, senior political analyst at Nomura, in a note on Wednesday.
The annual South Korea- U.S. military exercises, typically set for February or March, also usually raise tensions with the North, he noted. "It would be surprising if we were not to see this pattern repeated in 2015," he added.
In February this year, South Korea's Defense Ministry reported that North Korea fired several short-range missiles into the sea just days after the U.S. and South Korea began their joint exercises. Meanwhile, March 2013 saw the isolated nation threaten the U.S. with a nuclear strike, accusing Washington of using military drills with South Korea as a pre-text for nuclear war.
"Furthermore, the anniversary of the birth of Kim Il-sung on 15 April is an occasion when Pyongyang traditionally likes to make a show of strength of some sort," Newton added.