'While the likelihood of major conflict remains low, all of the trends are in the wrong direction, and prospects of a resolution are diminishing,' it said.

The study involved a wide range of interviews with officials and analysts across the region and follows its report in April that focused on China's role in the dispute.

'The extent and vagueness of China's claims to the South China Sea, along with its assertive approach, have rattled other claimants,' it says.

'But China is not stoking tensions on its own. Southeast Asian claimants, with Vietnam and the Philippines at the forefront, are now more forcefully defending their claims - and enlisting outside allies - with considerable energy.'

It notes growing competition over oil and gas reserves as well as depleted fish stocks, along with a build-up of naval and paramilitary fleets, as key factors in worsening tensions, along with nationalism, particularly in the case of Vietnam.

Warning of the erosion of 'long-standing restraints on conflict' in the region, the report says that rising nationalism is making compromise difficult and risks 'nudging' claimants towards 'positions of greater conflict with China'.

'For the Vietnamese leadership, like its Chinese counterpart, nationalism is a double-edged sword, working to its advantage while limiting its options,' the report notes.

Compared to Vietnam and the Philippines, however, it notes a relatively stable relationship between rival claimant Malaysia and China, in part due to its military capabilities and lack of nationalistic pressures.

It also points to lack of Chinese action over Malaysian exploration of disputed areas as evidence that Beijing takes different approaches with different claimants.

The crisis group notes divisions over meaningful ways of easing and managing tensions, not just in the Asean but even among the four Southeast Asian claimants. The study warns that international law - highly complex on maritime issues - is so far being used to buttress national interests rather than find a solution.

On Taiwan, the group's report notes a cautious approach from the current Taipei administration but warns that its 'limited diplomatic space' meant it had fewer options to exhaust before resorting to more provocative actions to defend its owns claims.

China claims virtually the entire South China Sea, expressed on its maps as the controversial nine-dotted line - a claim that bisects the exclusive economic zones of the Philippines, Malaysia, Brunei and Vietnam.

China and Vietnam claim the Spratly and Paracel archipelagos in their entirety, while the Philippines, Malaysia and Brunei claim the Spratlys part.

The claims of Taiwan, which keeps a military base on the biggest Spratly island of Tai Ping, mirror those of Beijing.