"Inter-Korean ties are going to go down, definitely. But what happens thereafter depends largely on how this new government in Seoul follows through," said Lee Dong-bok, a senior associate in Seoul with the CSIS think tank.
"North Korea could have handled it in a way that would have brought a quick and rapid closing. Instead, North Korea has chosen to take advantage of it in their own way to mount pressure on the Lee Myung-bak government," Lee said.
President Lee has pledged massive assistance for his impoverished neighbour, but unlike his liberal predecessors who dispensed aid freely, has said Seoul's largesse would be tied to progress North Korea makes in nuclear disarmament.
North Korea, angered by that approach, branded Lee a "traitor to the nation" and said in April it was cutting off dialogue.
Ko Yu-hwan, a Dongguk University professor of North Korea studies, said cooler heads would eventually prevail because of economic and political interests shared by the states.
"If the confrontation reaches its peak, both sides will realise that they cannot go on like that," Ko said.
The shooting incident came as North Korea was meeting with five regional powers to discuss a disarmament-for-aid deal.
Analysts see the shooting issue as confined to the two Koreas for now and do not expect it to spill over to the international nuclear disarmament talks.
Meanwhile, the family of the shooting victim, Park Wang-ja, called on the North to come clean on the killing.
"I want all suspicions to be answered," her husband, Bang Yeong-min, a retired policeman, told the national daily JoongAng Ilbo. "I want the truth so that my wife can rest in peace.
