SEOUL, South Korea - The South Korean military on Friday wrapped up three days of intense land and sea exercises as officials tried to decipher what a third nuclear test by North Korea, predicted for next year, would mean to already brittle relations between the two nations.

In recent weeks, tensions on the peninsula have been at some of the highest levels since a truce ended the direct combat of the Korean War in 1953.

Northern artillery shelled the South's Yeonpyeong Island on Nov. 23, killing four people, and South Korea followed with two live-fire training exercises, despite warnings from North Korea that it could retaliate if it felt threatened.

In recent days, one top North Korean official called the drills a "grave military provocation," and threatened a "sacred" nuclear war if the South attacked.

A report released Friday predicting that the North could carry out a third nuclear test as early as next year did little to erase the growing unease. North Korea carried out tests in 2006 and 2009.

"There is a possibility of North Korea carrying out its third nuclear test to seek improvement in its nuclear weapons production capability, keep the military tension high, and promote Kim Jong Eun's status as the next leader," said the report by a South Korean Foreign Ministry institute, referring to North Korean leader Kim Jong Il's youngest son and presumed successor.

Another report released Thursday warned that rising tensions between North and South Korea had "created a serious risk that any further provocation might turn into a wider conflict."

The study by the nonprofit International Crisis Group said that although the North would lose a war against its southern neighbor, "Seoul is constrained in retaliating forcefully because it has so much to lose" economically and politically.

"Pyongyang, isolated from global markets and domestic political forces, does not face such constraints," the report added. "Rather, the disparity permits it to provoke the South at very little cost, even while falling behind in the overall balance of conventional forces."