。
The two countries are on the brink of conflict.
Literal
Both-countries [topic-は] touch-and-go [possessive-の] relationship [in-にある].
一触即発 is a 四字熟語 meaning 'one touch and it explodes' — an explosive, touch-and-go situation. Used for tense standoffs where the slightest provocation could trigger conflict. ~の関係にある (to be in a relationship of) frames it as an ongoing state.