Bloodstone by Karl Edward Wagner An Immortal Heroic Villain/ antihero named Kane , Sword , sorcery , horrifying Alien Super Science in the form of the Bloodstone entity and the power it posses.
I think one difference between the two is that horror can be completely psychological. But it is hard to distinguish, say, between darkly comedic horror and darkly comedic dark fantasy. It can be complicated.
As for novels that straddle the line, I agree that some of Neil Gaiman's works fit. I'd add The Ocean at the End of the Lane by the same, Weaveworld by Clive Barker, and Something Wicked This Way Comes by Ray Bradbury.
Not sure there's a line so much as a shaded overlap that allows one reader to call, for instance, Gaiman's "Snow, Glass, Apples" a fantasy and another reader to call it horror. Thus, something like Bradbury's Something Wicked This Way Comes is an entry on both lists of great fantasy and lists of great horror.
I was going to say the fear or dread factor is important in distinguishing the two but then how does one explain a murder mystery which is usually not considered fantasy or horror? Fear and suspense are components of a murder mystery and yet Agatha Christie isn't considered horror. But Psycho is.
I think for me the hallmark of a “horror” story is that it’s focused on the protagonist’s fight for survival. Any grander or more nuanced goals are stripped away until at the story climax it is just the question of how they can keep from being killed.
Good horror stories can explore deep ideas about society, human nature, etc., but through the lens of existential dread.
I think everything is fantasy unless it has that dread feeling of 'other'. It's that queasy uneasiness that grips the part of the mind that can't rationalize or accept the events experienced with anything other than fear. Then it's horror.
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