The US ambassador to the United Nations has said North Korea is "begging for war" by testing a nuclear weapon over the weekend.
In response, Nikki Haley has demanded the strongest sanctions possible to bring the Kim Jong-Un regime to heel.
"Only the strongest sanctions will enable us to resolve this problem through diplomacy," she said in a meeting on Monday of the UN Security Council called by the US.
South Korea, meanwhile, has detected preparations by North Korea for a possible intercontinental ballistic missile launch, a move that would further exacerbate tensions a day after its sixth and most powerful nuclear detonation.
Chang Kyung-soo, acting chief of the Defense Ministry's policy planning office, told lawmakers in Seoul on Monday that North Korea was readying a missile firing, but didn't give a timeframe. The Yonhap news agency also cited South Korea's spy agency as saying there is a chance North Korea could fire an ICBM into the Pacific Ocean. North Korea threatened last month to launch missiles toward Guam.
The warning came after South Korea removed the final administrative hurdle for the full deployment of a US missile defense system, called Thaad or Terminal High-Altitude Area Defense, which China sees as a threat to the region's "strategic equilibrium."
The governments in Seoul and Washington were discussing deployment of a US carrier group and strategic bombers, Yonhap said.
Ms Haley reinforced US president Donald Trump’s threat on Twitter to cut off trade with nations that trade with North Korea. The US “will look at every country that does business with North Korea as a country that gives aid to their reckless intentions,” she said.
South Korea’s military also conducted a live-fire drill, firing a surface-to-surface ballistic missile and air-to-ground rocket into the sea between the Korean peninsula and Japan, with North Korea’s nuclear test site as the virtual target, the Joint Chiefs of Staff said in a text message.
Stocks in Asia and Europe fell, along with SandP index futures, as investors turned to haven assets, sending the yen, gold and Treasury futures higher.
Countries that trade with North Korea include China, the US’s biggest trading partner, which accounted for about a sixth of its overseas commerce. China hit back at Mr Trump’s threat to cut off trade, with Foreign Ministry spokesman Geng Shuang saying the comments were “neither objective nor fair.”
"What is definitely unacceptable to us is a situation in which on the one hand we work to resolve this issue peacefully but on the other hand our own interests are subject to sanctions and jeopardized," Geng said at a regular briefing in Beijing.
“China has leverage over North Korea, and we should be encouraging them to exercise that leverage,” UK prime minister Theresa May’s spokeswoman, Alison Donnelly, told reporters in London on Monday. “Our overwhelming view is that diplomatic means are best” for resolving the crisis..
Mr Trump, who threatened over the weekend to pull out of the US-South Korea trade agreement, also took aim at president Moon Jae-in's administration. South Korea is finding that its "talk of appeasement with North Korea will not work," he said on Twitter.
In response, Mr Moon’s office said that war shouldn’t be repeated and that South Korea and its allies “will pursue the denuclearization of the Korean peninsula through peace”.
– Bloomberg