South Korea held a live-fire military drill on a border island and scrambled fighter jets Monday, despite North Korean threats of deadly retaliation, as UN diplomacy on the crisis broke down.
But in an apparent sign of compromise over its nuclear ambitions, CNN said North Korea had agreed with US troubleshooter Bill Richardson to permit the return of UN atomic inspectors to ease tensions.
Defence ministry officials said the drill began at around 2:30 pm (0530 GMT) and lasted less than two hours. An AFP photographer sheltering in a bunker on Yeonpyeong island heard the booming sound of artillery.
"Our armed forces are now on alert and fighter jets are on airborne alert," a ministry spokesman said during the exercise. Yonhap news agency said two destroyers had also been deployed in forward positions in the Yellow Sea.
An emergency UN Security Council meeting failed to agree a statement on the crisis, and Russia warned that the international community was now left without "a game plan" to counter escalating tensions.
China's deputy UN ambassador warned that bloodshed on the peninsula would be a "national tragedy of fratricide" for the Korean people, the Xinhua news agency reported.
After a similar exercise by South Korean marines based on Yeonpyeong on November 23, the North fired some 170 shells onto or around the island, killing four people including civilians and damaging dozens of homes.
North Korea said Saturday the upcoming exercise "would make it impossible to prevent the situation on the Korean peninsula from exploding and escape its ensuing disaster".
But the United States has stood by South Korea's right to self-defence, and Japan Monday urged North Korea not to take any "provocative action" in response to the exercise.
The North disputes the Yellow Sea border drawn by United Nations forces after the 1950-53 Korean War. It claims the waters around Yeonpyeong as its own.
The North's military appears to be preparing for a counter-attack, removing covers from coastal artillery guns and forward-deploying some batteries, a military source told Yonhap.
About 20 US soldiers -- part of a 28,500-strong force stationed in the South -- are on Yeonpyeong to provide back-up to the latest drill, the US military said.
Pyongyang, deriding the US troops as a "human shield", threatened "decisive and merciless punishment" from its military.
But South Korea had said the exercise was a routine defensive drill, with guns pointed away from the North and shells landing 10 kilometres (six miles) south of the maritime border.