Repeated threats of aggression from North Korea have created little panic in Asian markets, with many investors interpreting the reclusive state's saber rattling as merely an attention-seeking ploy.
But rising tensions on the Korean peninsula should not be taken lightly, say experts, noting that there is a risk of miscalculation by both North and South Korea if the 30-year-old Pyongyang leader, Kim Jong-un, pushes the boundaries too far.
(Read More: North Korea Warns Foreigners to Leave South)
South Korea's benchmark Kospi Index rose almost one percent on Wednesday - its third straight day of gains - paring some of the losses seen in the previous week after North Korea declared it has entered "a state of war" with the South. Other equity markets in the region have not reacted dramatically, with Japan's Nikkei 225 extending gains this week on optimism over the Bank of Japan's aggressive monetary easing and China's Shanghai Composite edging down marginally on domestic factors including worries over a bird flu outbreak.
But experts point to the risk of underestimating Kim Jong-un's threat. "There is a risk that North Korea doesn't know where the red line is, and they engage in provocations which turn into a full scale conflict," said Patrick Chovanec, chief strategist at Silvercrest Asset Management, adding that the new leader's inexperience is a concern.
Tensions between the North and South escalated further on Wednesday following local media reports that Pyongyang has moved one or more long-range missiles in readiness for a possible launch.
This followed a warning by Pyongyang a day earlier, telling foreigners to leave South Korea to avoid being dragged into a "thermonuclear war." Adding to this, North Korean workers failed to turn up at the Kaesong Industrial Complex, jointly operated with the South, bringing operations to a halt on Tuesday.
"We need to take it very seriously. We're always on a knife edge of a crisis on the peninsula. Of course many threats are never really carried out, but we do seem to be entering new territory here, new threats, more specific threats, a lot more threats in a truncated period of time than is the norm," said Bruce Klinger, senior research fellow for the Heritage Foundation.