Nuclear Anxiety Returns to America

Opening their paper on Friday morning, readers of The Wall Street Journal encountered a financial item of unusually wide interest. “Here’s a question that’s probably not on the CFA exam,” write Mike Bird and Riva Gold. “What happens to financial markets if two nuclear-armed nations go to war?”

What, indeed? We soon learn the consequences could be dire. Short-term interest rates would rise and long-term rates would fall. In a small skirmish between North Korea and the United States, the S&P 500 Index might post 20-percent losses “before it became clear that the United States would prevail.” But were another nuclear-armed power like Russia or China to get involved, the European Central Bank would have to take extreme action and issue “highly dovish forward guidance.”

Yet even amid