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A South Korean soldier walks up the stairs at an observation post, near the demilitarized zone that separates the two Koreas, in Paju, north of Seoul, March 12, 2013.Kim Hong-Ji/Reuters

The Korean Peninsula has seen six decades of uncertainty, ever since the 1950-53 war between North and South ended with an armistice rather than a full peace treaty. That armistice, and whatever predictability it provided, is gone after Pyongyang announced Monday that it had torn up the agreement with a warning "the fiery clouds of war are now becoming thicker."

North Korea's unilateral withdrawal from the armistice came as militaries on both sides of the four-kilometre-wide Demilitarized Zone launched major exercises, with the rules – including whether the DMZ would be respected by the North – no longer clear.

Adding to the tension is the lack of experience of the two leaders facing off across the DMZ. Kim Jong-un took power in North Korea barely 14 months ago and may need to shore up his credentials with the military. South Korean President Park Geun-Hye, daughter of a long-time military dictator, was sworn in only two weeks ago and does not yet have a confirmed defence minister or national security adviser.

North Korea's state media blamed the tensions on the recent tightening of international sanctions targeting it, as well as a joint military exercise that began Monday involving 13,000 South Korean and American soldiers. Pyongyang says the drill is in fact preparation for a sneak attack against its forces.

The official Rodong Sinmun said North Korea's "front-line military groups … have entered the final-out war of confrontation, only waiting for the final order of assault." The editorial repeatedly mentioned North Korea's nuclear weapons, and claimed "the United States and the South Korean puppets, which have forced all sorts of miseries and pain on our nation, will be burned into a sea of fire in an instant," if war began.

Pyongyang also appeared to have followed through on a threat to sever the emergency hotline linking the North Korean and South Korean militaries, a Red Cross-operated phone line across the DMZ that was set up in the wake of the Korean War to help defuse future crises. South Korean officials said they tried twice to contact the North via the hotline on Monday and got no response.

While few observers believe a North Korean attack is imminent, tensions are at their highest point since North Korean artillery shelled a South Korean island in 2010, killing four people. South Korea's newly appointed foreign minister, Yun Byung-se, described the situation on the peninsula as "very grave" in his first speech Monday.

"I think North Korea is playing a game of exaggeration, making it seem as though we're on the edge of war," said Deng Yuwen, an influential Chinese journalist who has argued Beijing should cease backing its unpredictable ally.

China's role in the region is seen as crucial because Beijing – which intervened on behalf of the North during the 1950-53 war – has provided diplomatic support to Pyongyang for decades. China also accounts for about 80 per cent of North Korea's total trade.

China reacted angrily to a North Korean nuclear test last month, the regime's third since 2006, and Chinese diplomats co-drafted the United Nations Security Council resolution that tightened sanctions on Pyongyang in response. But Mr. Deng said Beijing would nonetheless continue to support Mr. Kim's regime, which it sees as a counterweight to U.S. and its allies South Korea and Japan.

One sign that the apocalyptic talk from Pyongyang may just be rhetoric is the fact that the Kaesong economic zone continued operating as normal on Monday. The industrial park, which is on the northern side of the DMZ and employs some 50,000 North Koreans working in factories owned by South Korean companies, is one of the few functioning parts of the North Korean economy.

There are hints that a growing financial crisis may be at the heart of the regime's apparent desperation. Japan's Mainichi Shimbun newspaper reported last week that rice prices had soared roughly 60 per cent in Pyongyang markets, amid signs China was tightening customs inspections at its border with North Korea.

Many observers believe Pyongyang's bellicosity is motivated by a desire to force Washington to negotiate directly with it. In the past, cash-strapped North Korea has offered staged disarmament in exchange for financial and food aid.