Residents in the army-held Jaffna peninsula said fierce shelling began before dawn, an eerie reminder of months of fighting that killed hundreds of civilians, troops and rebel fighters in the run-up to the talks in Geneva.
The abortive talks ended on Sunday with both sides meeting separately with mediator Norway before failing even to agree on whether or not to meet again for talks in the future.
That was a worst-case scenario for many analysts, diplomats and residents, who now fear a resumption of late July's heavy fighting that left hundreds dead, the worst violence since a 2002 ceasefire.
The Colombo stock market, which gained ahead of the talks on hopes of a breakthrough, fell 1.2 percent on Monday.
Officials said the talks ran aground over a central rebel demand that the government reopen a highway that crosses through rebel territory to Jaffna, which is cut off from the rest of the island by Tiger lines and where food is in desperately short supply.
The road -- nicknamed the "Highway of Death" because of past battles fought over it -- was closed in August because of fighting, stranding thousands of people, many of whom are still waiting to be evacuated from the peninsula by ship.
For some residents in Jaffna, the failed talks in Geneva mean only one thing: war.
"I have experienced enough violence, killings, bombings, shellings and displacements," said 38-year-old mother-of-two Vasantha Nallathamby, venturing out into a deserted Jaffna street as artillery and multi-barrel rocket fire roared in the distance.
"Now that the talks have failed for the eighth time, I will tell you the LTTE will not keep quiet," she added. "War is inevitable."

EMERGENCY SUPPLIES
The government is shipping emergency supplies to Jaffna, but residents issued ration cards say there is not enough to go around. While rice and lentils are being distributed, milk foods are scarce and the price of essentials such as toothpaste and garlic have soared.
The island's two-decade civil war has already killed more than 65,000 people since 1983, with hundreds killed and tens of thousands displaced since fighting flared in July.
Norwegian chief mediator Erik Solheim, who oversaw the talks, said the government and Liberation Tigers of Tamil Eelam (LTTE) had said they were committed to a truce which still technically holds on paper, and had promised not to launch military offensives.
But both sides spent Sunday accusing each other of abuses and of deadlocking the talks, which analysts say were a sideshow, and sporadic fighting continued.
"Both sides still believe that they can effect a clear, definitive balance of power on the ground before they can talk about anything seriously," said Paikiasothy Saravanamuttu of think-tank the Centre for Policy Alternatives.
"I'm expecting to see more fighting. I'm expecting to see the LTTE try to create a situation in which the army is put on the defensive," he added.
Tiger political wing head and chief negotiator S.P. Thamilselvan said overnight the rebels would not participate in new talks until the A9 highway linking the north to the rest of the country was reopened, something the government refuses to do.
The government argues it is unsafe to reopen the road because of rebel artillery fire, but analysts say the closure is helping to give the military a strategic advantage by curbing movement of rebel fighters and munitions.

Copyright Reuters, 2006