Limited clashes between North and South Korea are possible in their worst standoff since 1953 but their superpower patrons are likely to pull them back from fullscale military conflict, analysts say.
Tensions have risen sharply since a multinational investigation concluded last week that a North Korean submarine fired a heavy torpedo to sink the South Korean corvette that sank on March 26 with the loss of 46 lives.
In response to the investigators' report the South has cut trade, banned the North's cargo ships from its waters and begun a diplomatic drive to seek United Nations Security Council punishment.
The nuclear-armed communist North furiously denies it was involved in the sinking of the Cheonan and says the conservative Seoul government is waging a smear campaign as a pretext for aggression.
It has cut ties with the South and says the situation is akin to war.
"This is the worst situation we've had since the (1950-53) Korean War," said Yang Moo-Jin, of Seoul's University of North Korean Studies. "Military conflict cannot be completely ruled out."
The two Koreas appear to be on a collision course and to have "neither the will nor a strategy to exit from this very extremely difficult phase," he told AFP, saying the crisis could be ended only by the United States and China.
Yang expects the North to rachet up tensions by shutting down a Seoul-funded industrial complex or by shows of military strength near the disputed sea border.
If the Security Council imposes sanctions, in addition to those already imposed for nuclear and missile tests, the North might test an intercontinental missile and conduct a third nuclear explosion.
Kim Yong-Hyun, a North Korea expert at Seoul's Dongguk University, said limited warfare was possible -- but not a full-scale conflict since China and the US could put on the brakes.
"We have to take the threat of further escalation very seriously," Peter Beck, a North Korea specialist at Stanford University's Asia-Pacific Research Center, told AFP.
"Maybe things have to get worse before they get better. Given the tough stance that Seoul, with Washington's support, has taken, Beijing's role is more and more critical to pull the parties back from the edge."
North and South Korea may get closer to collision before efforts are made to avoid one, Beck said.
Daniel Pinkston, Seoul-based analyst with the International Crisis Group, said the situation is "pretty serious but I still think the likelihood of escalation into a full-scale war is low".
He expects the chill to last for months or years. And there was always the possibility of "misperception or miscalculation" along the world's most heavily fortified border -- especially now that communication links have been cut.
"If either side believed the other was preparing some military attack, then they might feel compelled to strike first," Pinkston said.
The trigger for any clash could come if and when the South switches on the loudspeakers it is now reinstalling to broadcast propaganda across the border, six years after they went silent.
Yang said the North is "very likely" to carry out its threat to open fire on the speakers since it sees propaganda as a serious threat to the regime.
"Information from the South can shock the North's soldiers and people by divulging a whopping gap in living conditions between the two Koreas, and the private life of leader Kim Jong-Il," Yang said.
The South Korean-led investigators said they found "overwhelming evidence" that North Korea had attacked the Cheonan.
They noted that parts of a torpedo salvaged from the Yellow Sea match the specifications of a type offered by the North for export, and explosive residue on it matches residue on the warship's hull.
Russia, a veto-wielding Security Council member, said it would send experts to Seoul to study the findings.
Russia's role will be important from now on since 90 percent of the North's weaponry has links to the former Soviet bloc, said Yang.
"Russia's verification of the investigation results will have a very powerful impact on the whole situation."
Pinkston said some of the North's rhetoric could be a sign of weakness.
The regime might be trying to signal strength because of the pressures they are under "and they probably don't want to fight a war that they know they would lose.
"Nevertheless, that doesn't mean that war is absolutely impossible."