Tukukkk

So here's the scenario. I have two rather large and evenly matched empires: one led by human knight sorcerers with bloodline based magic and another by dragons, who are fairly similar to the dragons found in Dungeon and Dragons as far as capabilities are concerned, but aren't colour coded for your convince in determining their ethics. I want the status quo to be a Cold War, with both sides deeply distrustful of each other, but neither keen on the idea of a full blown war.

Here's a little overview of both groups' political and military structures. It's a bit wordy, but I wanted some context for reference.

First, the human knight sorcerers:

The knight sorcerers rule a feudal state with an emperor who grants authority
to his vassals down the pyramid of lords and ladies of decreasing importance. So,
several local nobles would owe allegiance to a single regional lord. Several
regional lords would owe allegiance to the king and those kings would owe
allegiance to the emperor.

Law and general government structure is fairly uniform across the empire. While
local lords hold a large amount of power, abuse of it tends to end badly for the
lord in question. And while not a democracy, all citizens do have some basic
rights (no imprisonment without trial and such). Personal freedom has its limits,
since all citizens normally belong to a specific lord's domain by birth, but it's
an era of licenced movement and loose grips. As long as just your paperwork and
taxes are in order, things tend to go smoothly.

Local militias are well organised and a centrally controled army serves the
emperor directly. Their job is to deal with any situation that's too serious for
a local lord and his militia to deal with on their own. Military technologywise,
pikes and crossbows are extremely common. But primitive firearms, cannons and
use of fantastical beasts also occur. Cannons are far more common in the regular
army, but fantastical beasts such as griffins, wogs and hydras are more
frequently used by local militias.

And now the dragons:

The dragons are ruled by a dragon empress and her family. The empress is an
absolute ruler, but a fairly pragmatic and wise one. Male dragons each have their
own lands and humans that belong to them. They can do what they wish with both,
but poor management tends to get them in the empress's bad books. Getting in
trouble with the empress tends to result in said dragon's authority and position
being taken from him and granted to another dragon who's managed to curry favour
through good results and managing things well. Female dragons don't own lands, so
instead tend to take a strong interest in subjects other than rulership. They
tend to hold positions like alliance brokers, priestesses, spymasters and
scientists.

A major reason for this is a male dragon can sire half-dragons and spawn whole
lines of dragon-blooded servants, while female dragons can not. These dragon
bloods are considered from a legal point of view to be partly the dragon in
question whose blood run through their veins. This grants them considerably more
rights and privileges than normal humans. But it also means their actions tend to
reflect more the dragons' "favour the Empress" culture. As a result, a strong
sense of blood loyalty is found among dragon bloods, knowing that if they do
well, it be their closest relatives that will likely reap the benefits. It is
also why most of the dragon empire's high ranking positions are held by dragon-
bloods. Dragons are relatively few in number, but trust blood to get things done.

Humans living in dragon lands, by contrast, have no legal rights or protections
and their dragon overlords can do what they want with them. Also while it's
considered bad form to harm another dragon's humans. It's typically something the
offender would fix by paying a fine or doing the aggrieved dragon a favour.

Due to how the dragon empire is structured local law varies greatly, and all
armies belong to a specific dragon. Dragons themselves exercise considerable
martial might and some are tactical geniuses, with some of the older half-dragons
not being far behind. Elite dragon-blood regiments tend to be common among the
more martially gifted and older dragons, through the human based part of the
armies tends to have poorer training and worse equipment than the knight
sorcerers' forces. This is due in part to a less centralised and weaker
infrastructure. Cannons and other firearms are pretty rare as a result.

What ways might I keep these two empires from trying to start a war with each other?

One way would be to introduce a third party. It's neutral towards both the dragons and the knights, and it wouldn't stand a chance if it went to war with either of them.

But if both the dragons and the knights believe this third party could easily overrun them if they went to war, even if they are the winners, that would be a strong motive not go to war. Note that this third party doesn't actually have to be strong enough, or even have the desire to war -- all what needs to happen is that the dragons and knights believe they'll lose out to the third party once they defeat the dragons/knights, as any war between them will mean heavy losses on both sides.

Distance - the intervening mountain range, swamp, or near barren grasslands make logistics of open war extremely impractical

Attitude - it just isn't worth the trouble unless they bother us first

Internal politics - cold wars can be more about how the ruling class uses them to influence their own people than external politics. Maybe the distrust is mostly or entirely an excuse to say things like "pay your taxes or the dragons will get us!"

Excessive cost - alternatively, the border is close and boiling with tensions, but the empire is scared about massive loss of life from dragons (which would qualify individually as weapons of mass destruction, easily), whereas the dragons are concerned about the risk of losing even one of their few number of true dragons in open war.

One means to keeping a cold war going is the two antagonistic sides having the means of mutually assured destruction. These two empires could go to full out war with each, but in the end at best, one side will win. At worst, continued stale mate. With an "unlimited" supply of cheap soldiers (the serfs on the human side and humans on the dragon side) wars would break out often as the elites did not truly feel the consequences.

Now if both sides new that full out war would guarantee their societies utter destruction, they would sit in a cold war status, jockeying for dominance in other arenas, to better their positions.

No better example of how to keep a cold war going than the events from 1950's to 1988. One side just ended up collapsing because it could not keep up with the other.