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North Korea announced Tuesday that it would sever ties with South Korea and no longer continue to adhere to the non-aggression pact with Seoul.

In response, the Asian markets fell – Japan’s Nikkei Stock Average by 3.1%, Hong Kong’s Hang Seng Index by 3.5%, Taiwan’s Taiex by 3.2%, Thailand’s SET Index gave up 3.1%, and Singapore’s Straits Times Index by 2.7%. Other indices throughout the world also fell, including Australia’s S&P/ASX 200, India’s Sensex, and Indonesia’s JSX.

But by Wednesday many of these markets had recovered, at least for the short-term. Many market analysts explained the rise of world markets as a reaction of investors looking to buy investments cheaply due to the fall in stock prices.

It remains to be seen how the market will continue to react with the rising political tensions in Korea and the continued economic turmoil in Europe. These political tensions can be a good time to invest in binary options, especially in currencies like the Euro and yen.

Oil prices are recorded at a three-month low of $71.61 a barrel after the US Department of  Energy announced US stockpiles had risen by 1.9 million barrels, double the amount predicted earlier. Demand has not yet caught up with this sudden supply. Investors are speculating that fuel consumption will decrease in response to the European crisis.

It is also likely that this low is due to the ECB’s decision to buy foreign bonds, which artificially caused oil prices to rise last week from $75.11 to $76.80 a barrel.  Phil Flynn, a senior market analyst at PFG Best, likened this move to the equivalent of giving the market a shot of heroin , explaining that one the high wears off, the problem still remains.

The Euro also reached its lowest point ($1.28) against the dollar since 2008, causing prices of oil to fall. In intraday trading prices fell below $70 a barrel, prompting market analysts to predict that prices may continue to fall. If prices do fall below $70 a barrel, OPEC may cut production to keep prices steady.

Greece has been spending more as a country than it has been earning for decades, now burdened with a debt of €300 billion. Past governments covered up the problems and the debt continued to mount.  Recently rating agencies decided that Greek government bonds are worth even less than junk bonds, creating a drop in world markets as investors sold Greek bonds and went for greener and seemingly safer pastures of the UK, Germany, and US government investments.

Countries could lend to Greece to bailout the country, at a rate of 14 percent, a very expensive rate for borrowing. Greece will need to fiercely cutting the budget and create a long-term plan for growth.

As of April 11, Greece is being offered a Eurozone relief package of over €30 billion, of which Germany will pay €8.5 billion, and the IMF €15 billion. Now it looks like a sum of four times that much will be needed to get the Greek economy back on track.

If Greek defaults and declares bankruptcy, this could cause the Euro to fall and also discourage investment in other developing economies of the eurozone states, namely Portugal and Ireland.

Another option is for Greece to  exit the Euro for a temporary amount of time, avoiding massive unemployment and possibly boost the economy by using a devalued currency.

Now world markets are speculating that Portugal, with its large deficit and weak economy,  may be the next market to declare dire financial problems. Ireland is also suffering from a large deficit but has taken measures to reduce spending and is not currently being forecast for declaring bankruptcy.

Germany public option Is against contributing to Greek’s overspending, arguing that they should not have to pay for another country’s pension policy that is better that their own. It needs to pass the package in the German parliament before the money is distributed.

All of this provides ample opportunity to wage bets on the direction of the Euro in the future.

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