"I will never tolerate the North's provocations and nuclear threats," he said on a visit to the defence ministry, urging the South's military to adopt a "watertight defence posture".

"We are living in the reality where there is a high possibility of military clashes" along the disputed sea border off the Koreas' west coast or along the heavily-fortified land frontier that divides them, he said.

Tensions between Washington and Pyongyang have ramped up in recent weeks with the Trump administration saying military action was an option under consideration and the North threatening massive retaliation.

Left-leaning Moon favours engagement with the North to bring it to the negotiating table, but after Sunday's missile launch said dialogue would be possible "only if Pyongyang changes its behavior".

The North claimed the rocket was capable of carrying a nuclear warhead, although there are doubts whether the country could build a warhead small enough to fit into a missile.

The two Koreas -- technically still at war after the 1950-53 conflict ended only with a ceasefire -- have occasionally clashed along the border.

The North's shelling in 2010 of the southern border island of Yeonpyeong killed four people in the first attack on civilians since the war, sparking brief fears of an all-out conflict. (AFP)