NORTH KOREA has burnished the leadership credentials of its 26-year-old dictator-in-waiting with a deadly artillery attack on South Korean territory, causing its neighbour to return fire and scramble F-16 fighters.

Two South Korean marines died, and at least 12 were wounded. There were reports of civilian injuries and houses were set ablaze as scores of shells fell on Yeonpyeong island.

Flashpoint . . . smoke billows from houses on Yeonpyeong island after the North Korean artillery barrage. Credit:AFP

A North Korea expert at Beijing's Central Party School, Zhang Liangui, told the Herald that Kim Jong-un was deliberately destabilising the environment in order to mobilise the military and consolidate his power.

The South Korean President, Lee Myung-bak, held an emergency meeting and told officials to ''respond sternly'' but to avoid aggravating the situation. The military were placed on high alert.