A conflict on the Korean Peninsula could disrupt global businesses, making it "the greatest geopolitical threat to credit quality in Asia," according to Moody's Investors Service.
Such a scenario remains a "low-probability event," Moody's stated in a new report Wednesday following fresh bellicose rhetoric from North Korean leader Kim Jong Un and President Donald Trump. But should current tensions evolve to full-blown military action, the consequences could be immense.
The loss of human life is seen as the greatest repercussion from any major clash involving Washington, Seoul and Pyongyang, but the global economy will suffer as well, Moody's said. The report did not discuss the worst-case scenario of the use of nuclear weapons, instead concentrating on credit quality for countries and industries at risk.
If the conflict lasts a few weeks, Moody's warned of a hit to South Korean economic growth due to likely destruction of production capacity and infrastructure. But any slowdown would be temporary and offset by fiscal spending as well as Seoul's external liquidity buffers, the report said.
Here are some of the biggest losers, according to Moody's:
Since South Korea is one of the world's largest exporters of electronic components, "companies that manufacture electronics such as semiconductors would see a material impact as they rely heavily on Korean manufactured memory chips," the report said.
"The impact would only be reduced if manufacturers are able to source substitute parts elsewhere, although it is uncertain how rapidly alternative suppliers would be able to increase their production volumes."
"A fall in Korea's shipping capacity and likely trade disruptions in some highly affected Asian countries would also challenge some global ports and logistic companies, such as companies on the U.S. West Coast."
Seoul is also one of the world's largest energy consumers, so the nation's demand for natural gas and oil is set to reduce in the wake of conflict.
"As the economic effects of the conflict spread globally, reduced energy demand and prices would reduce revenue for global oil and gas exporters, such as Qatar and Kuwait," Moody's said.
Military action on the Korean Peninsula would likely result in heightened risk aversion across global financial market, potentially jeopardizing refinancing for many debt issuers, the report said.
"Negative credit implications for most banks and insurance companies in Asia Pacific would be low to moderate because of losses from financial-market volatility or losses from Korea-related projects that they finance directly or through their customers," Moody's said.