Ties between the arch-rivals have been under intense strain after a February 14 suicide bombing in the disputed Himalayan region of Kashmir that killed 40 Indian troops.

New Delhi had promised to act, and on Tuesday its warplanes flew into Pakistani airspace and struck what it said was a camp of Jaish-e-Mohammed (JeM), the group that claimed the Kashmir bombing.

"The limited objective of that pre-emptive strike was to act decisively against the terrorist infrastructure of Jaish-e-Mohammed in order to pre-empt another terror attack in India," Indian foreign minister Sushma Swaraj said during talks in China with her counterparts from Beijing and Moscow.

"India does not wish to see further escalation of this situation. India will continue to act with responsibility and restraint."

Islamabad, while denying the Indian strike caused any major damage or casualties, has vowed to retaliate -- fuelling fears of a dangerous confrontation in South Asia.

Pakistan's parliament was to meet Wednesday for a joint session convened by Prime Minister Imran Khan amid growing domestic pressure to respond to what is India's first air strike on Pakistani soil since the neighbours fought a war in 1971 -- when neither had nuclear weapons.

"We encourage India and Pakistan to exercise restraint, and avoid escalation at any cost," US Secretary of State Mike Pompeo said in a statement after speaking with his counterparts from both countries.

Pompeo added that in talks with Pakistani Foreign Minister Shah Mehmood Qureshi, he stressed "the priority of de-escalating current tensions by avoiding military action, and the urgency of Pakistan taking meaningful action against terrorist groups operating on its soil."

- Serious escalation -

Both sides have said that Indian warplanes penetrated as far as Balakot, a heavily forested region in northwestern Pakistan near the border with Pakistani-administered Kashmir.

Such a strike inside undisputed Pakistani territory would be a serious escalation of an already bitter rivalry.

But India has been vague over the exact location, which analysts said was a signal to Pakistan that it does not want an all-out conflict.

While confirming that payloads from Indian jets fell in Balakot, Pakistan has downplayed the incursion by describing it as across the Line of Control, the de facto border in Kashmir, rather than across its international border.

Balakot residents told AFP they heard explosions in the night, and that one person received minor injuries while no buildings were destroyed.

An AFP journalist who visited the site where the military and residents said the payload was dropped could see a large crater and trees snapped in half, and three mud houses, one with a collapsed wall, nearby.

The escalation has triggered international alarm, with China and the European Union also calling for restraint.

As the tensions surged, four people including two children were killed and 10 others injured in an exchange of fire between troops from both sides in Kashmir, Pakistani officials said Tuesday.

The two capitals regularly accuse each other of firings across the heavily militarised de facto border.

- Crisis for Khan -

The confrontation represents the first major foreign policy crisis for Pakistani premier Khan, who came to power last year vowing to seek dialogue with New Delhi.

In a sign of how quickly the situation could spiral, Pakistan's military spokesman alluded to its nuclear arsenal Tuesday, saying that Khan had also convened a meeting of the National Command Authority, the body which oversees its nuclear weapons.

Pakistan has denied involvement in the Kashmir bombing that sparked the latest tensions.

While India has consistently accused its neighbour of supporting extremist groups, Pakistan has equally vehemently denied any role in attacks in India and its only Muslim-majority state, Kashmir.

The Himalayan region has been divided between India and Pakistan since independence in 1947. They have fought two of their three wars over the territory.

Previously, the US and other members of the international community have acted to defuse tensions.

"If I were Washington, I'd be in overdrive making phone calls and signalling that it wants tensions to be de-escalated now," said Moeed Yusuf, an expert at the US Institute of Peace in Washington.

"The risks of letting this play out are too great."