North Korea escalates tensions Saturday announcing that it will shut down an industrial zone is operates jointly with the South.

The industrial zone is a vital source of hard currency for the impoverished state and hundreds of South Korean workers and vehicles enter daily after crossing the heavily armed border.

Many in the South saw the North's willingness to keep the zone open as a sign Pyongyang will not risk losing a lucrative source of foreign currency by mounting a real act of aggression.

The threat to shut it down could sharply escalate tensions because it would suspend a symbolic joint project run by the rivals.

The North has previously suspended operations at the factory zone at the height of political tensions with the South, only to let it resume operations later.

Earlier the North said it was entering a "state of war" with South Korea.

The two Koreas have been technically in a state of war for six decades under a truce that ended their co