The United States and European markets suffered badly because they opened straight after the attack.
Asian sharemarkets lost ground early in the day, along with the Australian and New Zealand markets.
However, by 5pm, the Shanghai, Hong Kong and Singapore markets were up, Australia was flat after being sharply down on opening, New Zealand closed up and the Korean Kospi and Japan's Nikkei were down only 0.5% and 1% respectively.
Craigs Investments Partners broker Chris Timms said markets seemed to accept the two Koreas had been at war for a long time and although, this time, the attack had included the shelling of an island, investors had weighed up the risk and decided it was not significant to the markets.
"It's been a pretty anaemic reaction today to the conflict."
Given North Korea's past behaviour, further military action seemed likely, but it was hard to predict if possible moves would come immediately.
Market players said Tokyo shares were due for a pull-back after having climbed this month on the back of solid corporate earnings, as well as short-covering and year-end portfolio tweaking by overseas investors.
The Nikkei's rise was starting to look overstretched after it hit a five-month closing high on Monday, when the Nikkei's divergence above its 25-day moving average - a gauge used widely among Japanese traders - climbed into over-bought territory.
Investors were looking for a trigger point to take profits, Mr Timms said.
In the United States, the CBOE volatility index, Wall Street's fear gauge, shot up 14.4% to 21.01 in its largest daily percentage gain since late June.
The Dow Jones industrial average dropped 170.02 points, or 1.52%, to 11,008.63. The Standard and Poor's 500 fell 19.05 points, or 1.59%, to 1178.79. The Nasdaq composite lost 41.19 points, or 1.63%, to fall to 2490.83.
