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Yahoo! My Yahoo! Mail More Yahoo! Services Account Options New User? Sign Up Sign In Help Yahoo! Search web search Home Singapore Asia Pacific World Business Entertainment Sports Technology Weekend Edition Australia China India Indonesia Japan Malaysia Philippines Thailand Vietnam North Korea shells South in fiercest attack in decades Reuters - 1 hour 18 minutes ago Send IM Story Print By Jack Kim and Lee Jae-won INCHEON, South Korea - North Korea fired scores of artillery shells at a South Korean island on Tuesday, killing two soldiers, in one of the heaviest attacks on its neighbour since the Korean War ended in 1953. The barrage -- the South fired back and sent a fighter jet to the area -- was close to a disputed maritime border on the west of the divided peninsula and the scene of deadly clashes in the past. South Korea was conducting military drills in the area at the time but said it had not been firing at the North. The attack followed revelations at the weekend that Pyongyang is fast developing another source of material to make atomic bombs, and analysts said the North may again be pursuing a strategy of calculated provocations to wrest diplomatic and economic concessions from the international community. It also follows moves by leader Kim Jong-il to make his youngest, but unproven, son his heir apparent, leading some analysts to suggest the bombardment might in part have been an attempt to burnish the ruling family's image with the military. "Houses and mountains are on fire and people are evacuating. You can't see very well because of plumes of smoke," a witness on the island told YTN Television during the shelling. YTN said at least 200 North Korean shells hit Yeonpyeong, which lies off the west coast of the divided peninsula near a disputed maritime border. Most landed on a military base there. Photographs from the island, 120 km west of Seoul, showed columns of smoke rising from buildings. Two soldiers were killed, and 17 wounded. Three civilians were also hurt. News of the attack rattled global markets, already unsettled by Ireland's debt woes and a shift to less risky assets. Experts say North Korea's Kim has for decades played a carefully calibrated game of provocation to squeeze concessions from the international community and impress his own military. The risk is that the leadership transition has upset this balance and that events spin out of control. South Korean President Lee Myung-bak, who has pursued a hard line with the North since taking office nearly three years ago, said attacking civilians was unforgiveable and any further aggression by Pyongyang would be severely punished. But he made no suggestion the South would retaliate further, suggesting Seoul was taking a measured response to prevent things getting out of hand. The North has a huge array of artillery pointed at Seoul that could decimate an urban area home to around 25 million people and cause major damage to its trillion-dollar economy. The two Koreas are still technically at war -- the Korean War ended only with a truce -- and tension rose sharply early this year after Seoul accused the North of torpedoing one of its navy vessels, killing 46 sailors. North Korea said its wealthy neighbour started the fight. "Despite our repeated warnings, South Korea fired dozens of shells from 1 p.m. ... and we've taken strong military action immediately," its KCNA news agency said in a brief statement. South Korea said it had been conducting military drills in the area beforehand but had fired west, not north. The White House condemned the attack, telling the North to halt its "belligerent action" and saying it was committed to defend the South. The United States has about 28,000 troops in South Korea, their combined forces facing an estimated one million North Korean soldiers who make up one of the world's biggest standing armies. Stephen Bosworth, the U.S. envoy on North Korea who was in Beijing for talks, said all sides agreed restraint was needed. "We both share a view that such conflict is very undesirable, and I expressed to them the desire that restraint be exercised on all sides and I think we agree on that," he told reporters. China was careful to avoid taking sides, calling on both Koreas to "do more to contribute to peace". A French diplomatic source said the U.N. Security Council would call an emergency meeting in a day or two over North Korea, against which it has imposed heavy economic sanctions for previous nuclear and missile tests. Russian Foreign Minister Sergei Lavrov called the escalation in tensions a "colossal danger". WON TUMBLES News of the exchange of fire sent the won tumbling in offshore markets with the 1-month won down about four percent at one stage in NDF trading. U.S. 10-year Treasury futures rose and the Japanese yen fell. The South Korean central bank, after an emergency meeting, said it planned to cooperate with the government to take measures to stabilise markets if necessary. Many traders expect South Korea's financial markets to fall further when trading opens on Wednesday. But analysts said the attack was not likely to escalate into a more serious military confrontation and so any market losses would be temporary. Past provocations by Pyongyang have had only a very fleeting negative effect on South Korean markets. "We believe the market correction this time will be very short-lived,' said Young Chang, analyst at UBS in Seoul. "Over several decades, North Korea has created similar geopolitical tensions in order to redirect their national interest to defence, which we believe helps the regime maintain power. North Korea's interest is to maintain the regime and not to invade South Korea, in our view." Washington has branded the North a danger to the region and expressed concern Pyongyang would sell nuclear weapons technology to other states. It has said it was ready to return to negotiations with North Korea but wants to see more commitment to denuclearisation beforehand. "It's unbelievable," said Zhu Feng, professor of international relations at Peking University. "Today's news proves that North Korea, under unprovoked conditions, shot these South Korean islands. It's reckless provocation. They want to make a big bang and force the negotiations back into their favour. It's the oldest trick." The North depends heavily on China for economic and diplomatic support and Kim Jong-il has visited China twice this year, in part to gain backing for his succession plans. Those ties have become a sore point with Washington after reports that North Korea appears to have made big steps towards enriching uranium, possibly using technology that passed through or even originated in China. Recommend Send IM Story Print Related Articles World edgy on Korea, Russia sees "colossal danger" Reuters - 28 minutes ago North Korea shells South in fiercest attack in decades Reuters - 1 hour 19 minutes ago North Korean artillery pounds S.Korean island AFP - 1 hour 19 minutes ago Cambodia festival stampede leaves nearly 380 dead AFP - 2 hours 13 minutes ago Indonesia issues eruption alert for second volcano AFP - 2 hours 46 minutes ago News Search Top Stories Greece ordered to cut deeper to get past debt 'crossroad' US hikes growth estimate for third quarter New AIDS cases fall by one fifth in a decade: UN Britain's Prince William to wed in April at abbey Conservative fever builds for Palin book tour More Top Stories » ADVERTISEMENT Most Popular Most Viewed Most Recommended 'Naked' airport scanners may be 'dangerous' World leaders scramble for funds to save the tiger N.Korea shells island in South, causing injuries DiCaprio in plane engine scare: report Qantas says A380 superjumbos back in action Saturday More Most Viewed » 'Naked' airport scanners may be 'dangerous' EU fines 11 airlines 800 million euros for air cargo cartel Pilgrims stone 'devil' as Muslims celebrate Eid World leaders scramble for funds to save the tiger Germany unveils new 'psychic' octopus -- and he's French More Most Recommended » Elsewhere on Yahoo! 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