Published: May 27, 2010 8:53 AM EDT

SEOUL, South Korea (AP) - Stung by a surprise underwater attack, South Korea flexed its muscles Thursday with anti-submarine drills and a U.S. general offered strong words of support as the allies sent a clear message to adversary North Korea: Don't try it again.

Pyongyang, however, wasted little time in responding, saying it would launch "immediate physical strikes" against southern ships that enter its waters as tensions spiked further a week after Seoul blamed the North for torpedoing a warship.

Inter-Korean political and economic ties have been steadily deteriorating since the February 2008 inauguration of South Korean President Lee Myung-bak, who vowed a tougher line on the North and its nuclear program. But the sinking of the warship Cheonan and deaths of 46 sailors in March have returned military tensions - and the prospect of armed conflict - to the fore.

Off the South's western coast, 10 warships, including a 3,500-ton destroyer, fired artillery and other naval guns and dropped anti-submarine bombs during a one-day exercise to boost readiness, the navy said. It was the first such drill since the Cheonan disaster, a navy official said on condition of anonymity, citing department policy.

South Korea also is planning two major joint military drills with the U.S. by July in a display of force intended to deter future aggression by North Korea, according to South Korea's Joint Chiefs of Staff. Gen. Walter Sharp, chief of the 28,500 American troops in South Korea, said the United States, South Korea and other members of the U.N. Command "will sustain our efforts to deter and defeat aggression."

"We call on North Korea to cease all acts of provocation and to live up with the terms of past agreements, including the armistice agreement," Sharp said Thursday during a Memorial Day speech.

The U.S. fought on the South Korean side during the 1950-53 Korean War, which ended in an armistice, not a peace treaty. North Korea has long demanded a permanent peace agreement. The North has denied it attacked the Cheonan and says attempts to punish it would lead to war.

On Thursday, it announced that in retaliation for the South's moves it would scrap an accord aimed at preventing accidental naval clashes with the South. The agreement had covered disputed western waters where the Koreas have fought three bloody sea battles and near where the Cheonan sank. "Immediate physical strikes will be launched" against any South Korean ships that intrude into North Korean waters, the country's military said in a statement, carried by the official Korean Central News Agency.

The prospect of another eruption of serious fighting has been constant on the Korean peninsula since the Korean War ended. But it had been largely out of focus in the past decade as North and South Korea took steps to end enmity and distrust, such as launching joint economic projects and holding two summits.

The sinking of the warship, however, clearly caught South Korea - which has a far more modern and advanced military than its impoverished rival - off guard. "I think one of the big conclusions that we can draw from this is that, in fact, military readiness in the West Sea had become very lax," said Carl Baker, an expert on Korean military relations at the Pacific Forum CSIS think-tank in Honolulu, calling it nothing short of an "indictment" of Seoul's preparedness there.

Now, South Korean and U.S. militaries are taking pains to warn the North that such an embarrassment will not happen again. South Korean media reported earlier Thursday that the U.S.-South Korean combined forces command led by Sharp raised its surveillance level, called Watch Condition, up a level from 3 to 2. Level 1 is the highest.

The increased alert level means U.S. spy satellites and U-2 spy planes would intensify their reconnaissance of North Korea, the JoongAng Ilbo newspaper said, citing an unidentified South Korean official.

The South Korean and U.S. militaries would not confirm any reports on changes to the level. If confirmed, it would be the first change since North Korea carried out a nuclear test in May 2009, a South Korean Joint Chiefs of Staff officer said on condition of anonymity, citing department policy.

A South Korean Defense Ministry official said Seoul will "resolutely" deal with the North's measures announced Thursday, though did not elaborate. He spoke on condition of anonymity, citing department policy. South Korea's military said there were no signs of unusual activity by North Korean troops.

Despite the tensions, most analysts feel the prospect of a major war, such as what destroyed the peninsula 60 years ago following an invasion from the North, remains remote as Pyongyang knows what's at stake.

"I don't think they're really interested in going to war," said Daniel Pinkston, a Seoul-based analyst for the International Crisis Group think tank. "Because if it's all-out war, then I'm convinced it would mean the absolute destruction" of North Korea. "And their country would cease to exist."