Korean relations enter a new phase

North Korea’s official news agency KCNA yesterday announced that Kim Jong-il died on Saturday. The death of the country’s dictator had been expected for many months he had pancreatic cancer yet markets in Seoul reacted negatively as a fresh period of nervous uncertainty entered the always precarious relationship between the two parts of the Korean peninsula.

The Kospi index of leading South Korean stocks plunged 5% and the won fell by 1.8% against the dollar. Young Sun Kwon, an analyst at Nomura, described Kim’s death as a “black swan” event, and expects geopolitical risks to rise.

The North or Democratic People’s Republic of Korea laid the groundwork...