Updated 3:05 p.m. ET
North and South Korea exchanged artillery fire Tuesday after the North shelled an island near their disputed sea border, killing at least two South Korean marines, setting dozens of buildings ablaze and sending civilians fleeing for shelter.
The clash, which put South Korea's military on high alert, was one of the rivals' most dramatic confrontations since the Korean War ended, and one of the few to put civilians at risk, though no nonmilitary deaths were immediately reported. Sixteen South Korean soldiers and three civilians were injured and the extent of casualties on the northern side was unknown.
CBS News correspondent Celia Hatton reports that the island's roughly 1,200 residents took cover as the shelling continued for about an hour.
The skirmish began when Pyongyang warned the South to halt military drills in the area, according to South Korean officials. When Seoul refused and began firing artillery into disputed waters, albeit away from the North Korean shore, the North retaliated by bombarding the small island of Yeonpyeong, which houses South Korean military installations and a small civilian population.
"I thought I would die," said Lee Chun-ok, 54, an islander who said she was watching TV in her home when the shelling began. Suddenly, a wall and door collapsed.
"I was really, really terrified," she told The Associated Press after being evacuated to the port city of Incheon, west of Seoul, "and I'm still terrified."
South Korea responded by firing K-9 155mm self-propelled howitzers and dispatching fighter jets. Officials in Seoul said there could be considerable North Korean casualties. The entire skirmish lasted about an hour.
Each side has threatened the other against another attack.
South Korean President Lee Myung-bak, who convened an emergency security meeting shortly after the initial bombardment, said that an "indiscriminate attack on civilians can never be tolerated."
Lee said Seoul will unleash an "enormous retaliation" should the North attack again. His comments were posted on the presidential website and made during a visit to the Joint Chiefs of Staff's command and control room.
Initially, Lee ordered officials to issue a "stern" response, and the South did fire across the border, but he also stressed the need to prevent the clash from escalating.
The skirmish came amid tension over North Korea's claim that it has a new uranium enrichment facility and just over a month after North Korean leader Kim Jong Il Kim Jong Un as his heir apparent
The countries' western maritime boundary has long been a flash point. The North does not recognize the border that was unilaterally drawn by the United Nations at the close of the 1950-53 Korean War. North and South Korea have fought three bloody skirmishes near the maritime border in recent years, most recently in November 2009.
The United States, which has more than 28,000 troops stationed in South Korea, .
"It's an outrageous act," White House spokesman Bill Burton told reporters.
In an earlier statement released before dawn, shortly after the attack, White House Press Secretary Robert Gibbs called on North Korea to "to halt its belligerent action and to fully abide by the terms of the armistice agreement," the 1953 pact that ended the Korean War.
Gibbs said the White House "is in close and continuing contact" with the South Korean government.
"The United States is firmly committed to the defense of our ally, the Republic of Korea, and to the maintenance of regional peace and stability," he said.
The White House said it planned to work with its international partners to determine the appropriate next steps.
U.N. Secretary-General Ban Ki-moon also condemned North Korea's artillery attack, calling it "one of the gravest incidents since the end of the Korean War," his spokesman Martin Nesirky said. Ban called for "immediate restraint" and insisted "any differences should be resolved by peaceful means and dialogue," the spokesman said.
The supreme military command in Pyongyang threatened more strikes if the South crossed their maritime border by "even 0.001 millimeter," according to the North's official Korean Central News Agency.
South Korea holds military exercises like Tuesday's off the west coast about every three months.
A statement from the North said it was merely "reacting to the military provocation of the puppet group with a prompt powerful physical strike," and accused Seoul of starting the skirmish with its "reckless military provocation as firing dozens of shells inside the territorial waters of the" North.
No additional U.S. assets are being moved into the region, reports CBS News correspondent Bob Orr.
I wouldn't say anything has been initiated because of this," Col. David Lapan told Pentagon reporters Tuesday. "At this point it's premature to say we're considering any action."
No U.S. troops were involved in the South Korean military exercises, although U.S. marines have participated in the exercises in the past.
Although the prevailing view is that the latest attack was in response to the military exercises, South Korean military drills some experts say the attack is primarily a step in the grooming of Kim Jong Un.
Citing a North Korea expert at Beijing's Central Party School, Zhang Liangui, The Sydney Morning Herald reported Tuesday that the younger Kim was "deliberately destabilizing the environment in order to mobilize the military and consolidate his power."
Government officials in Seoul called North Korea's bombardments "inhumane atrocities" that violated the 1953 armistice halting the Korean War. The two sides technically remain at war because a peace treaty was never signed, and nearly 2 million troops - including tens of thousands from the U.S. - are positioned on both sides of the world's most heavily militarized border.
The clash, along with continuing worry about the fallout from Ireland's debt crisis, was a factor in pushing Asian and European stock markets sharply lower. Wall Street opened lower.
The exchange represents a sharp escalation of the skirmishes that flare up along the disputed border from time to time. It also comes amid high tensions over the North's apparent progress in its quest for nuclear weapons - Pyongyang claims it has a new uranium enrichment facility - and six weeks after North Korean leader Kim Jong Il anointed his youngest son, Kim Jong Un, as the heir apparent.
"It brings us one step closer to the brink of war," said Peter Beck, a research fellow with the Council on Foreign Relations, "because I don't think the North would seek war by intention, but war by accident, something spiraling out of control has always been my fear."
Columns of thick black smoke rose from homes on the island, video from YTN cable TV showed. Screams and shouts filled the air as shells rained down on the island just south of the disputed sea border.
Yeonpyeong lies a mere seven miles from - and within sight of - the North Korean mainland.
China, the North's economic and political benefactor, which also maintains close commercial ties to the South, appealed to both sides to remain calm and "to do more to contribute to peace and stability on the peninsula," Foreign Ministry spokesman Hong Lei said.
Stephen Bosworth, the Obama administration's special envoy to North Korea, said he discussed the clash with the Chinese foreign minister and that they agreed both sides should show restraint. He reiterated that the U.S. stands firmly with its ally, South Korea.
Gen. Walter Sharp, commander of U.S. forces in South Korea and the U.S.-led U.N. Command, said in a Facebook posting that the U.S. military is "closely monitoring the situation and exchanging information with our (South Korean) allies as we always do."
Yeonpyeong, famous for its crabbing industry and home to about 1,700 civilians as well as South Korean military installations. There are about 30 other small islands nearby.
North Korea fired dozens of rounds of artillery in three separate barrages that began in midafternoon, while South Korea returned fire with about 80 rounds, South Korea's Joint Chiefs of Staff said. Naval operations had been reinforced in the area, the JCS said early Wednesday, declining to elaborate.
The clash comes amid tension over North Korea's claim that it has a new uranium enrichment facility and just over a month after North Korean leader Kim Jong Il Kim Jong Un as his heir apparent.
Bosworth that Pyongyang's claim of a new enrichment facility was provocative and disappointing but not a crisis or a surprise.
Bosworth's comments, following a meeting with South Korean Foreign Minister Kim Sung-hwan, came as the United States and the North's neighbors scrambled to deal with Pyongyang's of its highly sophisticated, modern enrichment operation that had what the North says are 2,000 recently completed centrifuges.
Top U.S. military officials warned the new facility could speed up the North's ability to make and deliver viable nuclear weapons. South Korea's defense minister, meanwhile, told lawmakers Monday that Seoul will discuss the possibility of having the U.S. bring tactical nuclear weapons back into the country.
The Koreas' 1950s war ended in a truce, but North Korea does not recognize the western maritime border drawn unilaterally by the United Nations at the close of the conflict, and the Koreas have fought three bloody skirmishes there in recent years.
South Korea holds military exercises like Tuesday's off the west coast about every three months.
In March, a South Korean warship . Forty-six sailors were killed in what South Korea calls the worst military attack on the country since the war.
Seoul blamed a North Korean torpedo, but Pyongyang denied responsibility.
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