The sonorous pre-dawn call to prayer mingled with the roar of warplanes last week in Srinagar, the summer capital of Indian-controlled Kashmir. Less than 100 miles from the Himalayan city, two nuclear-equipped armies were fighting duels in the sky.

It was a week of milestones in the abysmal relationship between the subcontinent’s two biggest powers: the first time India bombed Pakistani territory in five decades; the first publicly acknowledged dogfight between their jets in as many years; and the closest the pair have come to war so far this century.

No city bears the brunt of the tensions between the two more than Srinagar, a city whose Mughal architecture, tranquil lakes and mountain surroundings are the scenic backdrop for regular gunfights, bombings and violent protests. Last week red crosses were painted on the roofs of hospitals in the city – marking them out as medical facilities from the sky – and stocks of food, water and fuel dwindled as the prospect of a fourth war between India and Pakistan over Kashmir suddenly appeared real.

Pakistan’s return of a captured Indian pilot on Friday night was the first sign of de-escalation and a possible return to a fragile status quo. That is precisely what some Kashmiris say that they fear. “When they fly, I pray something happens now,” says Mohammad Ashraf Wani of the jets that woke him every night last week. “Our last hope is that war will solve this once and for all.”

Kashmir was a semi-independent princely state until the British left India in 1947. Under invasion from Pakistan, Kashmir’s Hindu monarch opted to be absorbed into India. An ensuing war cleaved Kashmir into parts, one controlled by India and the other by Pakistan. (A third section in the east is ruled by China.)

India’s union with Kashmir, its only Muslim-majority region, has always been unstable. In 1989 it turned toxic with the eruption of a full-blown militancy fuelled by money and fighters from across the heavily militarised border with Pakistan.

The insurgency has grown again in the past five years, this time with a difference. Its ranks have been swelled by young Kashmiris, who disappear from their colleges or homes and surface again clutching rifles in videos widely circulated on social media. India’s government has responded with force: more militants were killed last year than any year in the previous decade.

Such announcements are celebrated in Delhi, but brew alienation and anger among Kashmiris. Civilians have started running to the sites of armed clashes, putting their bodies on the line to help insurgents escape.

Wani, 28, is part of a generation of Kashmiris who have grown up during the insurgency. In 2016 he was blinded by pellets fired by Indian security personnel trying to put down popular protests against Delhi’s rule.

If India and Pakistan were to fight another war over Kashmir, it would make no difference to his life, he says. “We have been seeing war every day. We have never seen peace.”

A bitter winter in Srinagar had just started to ease when the latest crisis was sparked on 14 February. That afternoon a local member of a Pakistan-based militant group rammed a car laden with explosives into a bus carrying Indian paramilitaries. The explosion was heard for miles around. At least 40 people were killed, the highest death toll from a single attack in the history of the insurgency.

India promised retribution; in Srinagar, police and doctors’ leave was cancelled, health departments were ordered to stockpile medicine and 100 extra companies of paramilitary forces were shuttled to the region.

After hundreds of separatist and religious leaders were rounded up and jailed by police, businesses across the city shut in protest, leaving Srinagar’s streets and markets deserted. “People just do nothing at home,” says Arshad Ahmad, who lives in the restive southern district of Shopian, which frequently shuts down in solidarity when militants are killed by security forces. “We sit at home, meet friends, visit relatives, and just discuss politics and the situation.”

Economic life in the region, which is frequently interrupted, has virtually ground to a halt, said the manager of an insurance company. “People hold money back and focus on the essentials,” he says. “They don’t feel fear so much as an anxiety over what will happen next.”

Kashmir is landlocked, and supplies of food and petrol were already running short after landslides and snow closed the only highway into the region. The prospect of war prompted panic buying. Supermarket shelves emptied of staple foods and there were long queues for fuel.

Dal Lake, in the north-east of Srinagar, is one of the troubled region’s most beautiful. Photograph: Duy Phuong Nguyen/Alamy Stock Photo/Alamy

“When all these things were happening and we saw convoys of artillery moving, we felt something was going to happen,” said Obaid Qadir, a state employee. “Immediately we made sure to purchase gas, rice, cooking oil and spices. We got stocks to last for at least two months.”

Heavy mortar fire across the line of control, a regular occurrence along a de facto border Bill Clinton once called “the most dangerous place in the world”, disrupted an unlikely trade route.

Since 2007 merchants on both sides of divided Kashmir have exchanged goods in a barter system intended to build confidence between the countries. “The trade remained shut because of the shelling,” said Hilal Turki, the president of the union for cross-border traders. The 140 trucks that ply the route have been dormant, parked at a trading point near the ceasefire line, for more than two weeks.

Traffic could resume again soon and, with the threat of war averted, Kashmir will disappear from the world’s attention. But resentment among those who live there will continue to grow, planting the seeds for the next crisis, says Noor Ahmad Baba, a retired professor of political science at the Central University of Kashmir.

“This muscular policy under [Indian prime minister] Narendra Modi has created mistrust and it has created more problems,” Baba says.

Significantly, it was a local man, Adil Ahmad Dar, who carried out the 14 February attack on the Indian convoy. It is estimated that more than 250 like him are hiding in the hills around Srinagar or in safe houses scattered throughout the region.

Heavy firing over the border continued throughout this weekend. The stalemate between Delhi and Islamabad proves only what Kashmiris already know, says Madhosh Balhami, a poet whose home – containing his life’s work – was destroyed during a gunfight between militants and police last year.

“Kashmir cannot be a military issue,” he says. “Both these countries are not learning any lessons.”

In the same breath, he adds that he, too, would welcome a war. “Better than the last 30 years is to have a seven-day war and finish this issue for once and all,” he says.