North Korea said on Wednesday it is considering plans for a missile strike on the U.S. Pacific territory of Guam, just hours after President Donald Trump told the North that any threat to the United States would be met with "fire and fury".

The sharp increase in tensions rattled financial markets and prompted warnings from U.S. officials and analysts not to engage in rhetorical slanging matches with North Korea.

Pyongyang said it was "carefully examining" a plan to strike Guam, which is home to about 163,000 people and a U.S. military base that includes a submarine squadron, an airbase and a Coast Guard group.

A Korean People's Army spokesman said in a statement carried by state-run KCNA news agency the plan would be put into practice at any moment once leader Kim Jong Un makes a decision.

Guam Governor Eddie Calvo dismissed the North's threat and said the island was prepared for "any eventuality" with strategically placed defenses. He said he had been in touch with the White House and there was no change in the threat level.

"Guam is American soil ... We are not just a military installation," Calvo said in an online video message.

North Korea also accused the United States of devising a "preventive war" and said in another statement that any plans to execute this would be met with an "all-out war wiping out all the strongholds of enemies, including the U.S. mainland".

Washington has warned it is ready to use force if needed to stop North Korea's ballistic missile and nuclear programs but that it prefers global diplomatic action, including sanctions. The U.N. Security Council unanimously imposed new sanctions on North Korea on Saturday.

Trump issued his strongest warning yet for North Korea in comments to reporters in New Jersey on Tuesday.

"North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen," Trump said.

"BLACK SWAN EVENT"

North Korea has made no secret of its plans to develop a nuclear-tipped missile able to strike the United States and has ignored international calls to halt its nuclear and missile programs.

Pyongyang says its intercontinental ballistic missiles (ICBMs) are a legitimate means of defense against perceived U.S. hostility, including joint military drills with South Korea.

U.S. stocks closed slightly lower after Trump’s comments, while a widely followed measure of stock market anxiety .VIX ended at its highest in nearly a month. [MKTS/GLOB]

The U.S. dollar index .DXY edged down and the safe-haven yen JPY= strengthened against the U.S. currency after North Korea's response. Asia stocks dipped, with South Korea's benchmark index .KS11 down 0.9 percent and Japan's Nikkei .N225 1.6 percent weaker.

"Tensions will continue to mount and could eventually develop into a black swan event that the markets are not prudently considering," Steve Hanke, professor of Applied Economics at Johns Hopkins University, told the Reuters Global Markets Forum.

The United States has remained technically at war with North Korea since the 1950-53 Korean conflict ended in an armistice rather than a peace treaty.

Seoul is home to roughly 10 million people and within range of massed North Korean rockets and artillery, which would be impossible to destroy in a first U.S. strike.

Tens of thousands of U.S. troops remain stationed in South Korea and in nearby Japan, the only country to have been attacked with nuclear weapons. Wednesday marked the 72nd anniversary of the atomic bombing of the city of Nagasaki by the United States.

"WAR, WAR, WAR"

In Dandong, a Chinese trading hub across the border from North Korea, residents said they were unperturbed by the escalating rhetoric.

"North Korea always talks about war, war, war, but it never happens," said a restaurant owner who asked to be identified only by her surname, Yang.

"We now live in peaceful times. But if war does break out it will be us ordinary people that suffer," she said.

Another resident, Zhang Shubin, 63, said North Korea knew that it faced economic collapse if China went significantly further with its sanctions.

"These so-called sanctions are nothing," he said. "If President Xi (Jinping) really wanted to, then China can make Kim Jong Un behave."

Tensions in the region have risen since North Korea carried out two nuclear bomb tests last year and two ICBM tests in July.

Japanese fighters conducted joint air drills with U.S. supersonic bombers in Japanese skies close to the Korean peninsula on Tuesday, Japan's Air Self Defence Force said.

On Monday, two U.S. B-1 bombers flew from Guam over the Korean Peninsula as part of its "continuous bomber presence", a U.S. official said, in a sign of Guam's strategic importance.

DEEPLY TROUBLING

Guam, popular with Japanese and South Korean tourists, is protected by the advanced U.S. Terminal High Altitude Area Defense (THAAD) anti-missile system recently installed in South Korea, the deployment of which has angered China.

Madeleine Z. Bordallo, the U.S. Congresswoman for Guam, said she was confident U.S. forces could protect it from the "deeply troubling" North Korean nuclear threat. She called on Trump to show "steady leadership" and work with the international community to de-escalate tensions.

The Guam Visitors Bureau’s branch in Tokyo said it had not received any inquiries about the threat, and major South Korean tour agencies also reported no cancellations.

Republican U.S. Senator John McCain said Trump should tread cautiously when issuing threats to North Korea unless he is prepared to act.

"I take exception to the president’s comments because you've got to be sure you can do what you say you’re going to do," he said in a radio interview.

A Japanese government source said Japan was not asking for Trump to tone down his remarks, which were in line with his policy of not letting the other side know what the United States might actually do while keeping all its options on the table.

Former U.S. diplomat Douglas Paal, now with the Carnegie Endowment for International Peace think tank in Washington, said Trump should not get into a war of words with Pyongyang.

"It strikes me as an amateurish reflection of a belief that we should give as we get rhetorically. That might be satisfying at one level, but it takes us down into the mud that we should let Pyongyang enjoy alone," said Paal, who served as a White House official under previous Republican administrations.

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