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In a LinkedIn post, Ray Dalio of the world's largest hedge fund Bridgewater Associates said that the emerging risks posed by the geopolitical play between Washington and Pyongyang as "more political than economic, which makes them especially challenging to price in."

Dalio said, "Prospective risks are now rising and do not appear appropriately priced in. Two confrontational, nationalistic, and militaristic leaders [are] playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war."

Dalio, who has been adjusting the portfolio of Bridgewater's $160bn assets amidst the escalation of tension in the Korean peninsula, is recommending investors to buy safe haven assets.

He added, "We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit."

Missile test shows North Korea is not afraid of U.S. threats

Dalio published his views after Monday's latest ballistic missile test by North Korea over Japan was sending a clear message to Washington and its allies, that the hermit kingdom is not afraid of U.S. threats.

The missile launch, which splashed into the northern Pacific Ocean, quickly drew ire from world leaders, especially the U.S., Japan, South Korea, and others. President Donald Trump described North Korea's aggressive missile test as showing its "contempt for its neighbors" as he upped the rhetoric by saying that "all options are on the table" (including military) in terms of U.S. response.

Pershing Square preparing for stock market drop

Pershing Square Capital Management's Bill Ackman told his investors to prepare for a possible drop in the stock market amidst the rising tension in the region.

He revealed that his hedge fund took a "small position" in out-of-the-money call options on a volatility index to "protect against stock market risk."

Russia moves citizens away from North Korea border

In a further evidence that tension in the Korean peninsula is boiling, Russia's civil defense officials on Tuesday relocated nearly 1,500 resident in Vladivostok to "safe areas" after North Korea's latest missile test. Russia shares a 24-mile land border.

Pro-Kremlin social media site Mash said, "A verbal order was given to relocate 1,500 people to safe areas. The order came from the regional department of the Russian Ministry of Emergencies."

The move came after Russian deputy foreign minister Sergei Ryabkov said that Moscow was "extremely worried" about the missile test and the "tendency towards an escalation".