North Korea is preparing to test-fire a medium-range missile capable of reaching all of South Korea and most of Japan, South Korea's Yonhap news agency quoted a lawmaker as saying on Tuesday after a defense briefing.

According to the report, Pyongyang is preparing the mid-range missile launch from a base in the southeastern part of the country, the unnamed South Korean lawmaker said without offering further details.

News of the possible launch rattled markets in Seoul. Shares gave up earlier gains and briefly turned negative after the report about the planned missile launch.

Last week, North Korea conducted a nuclear test that put it closer to having a working atomic bomb, test-fired a barrage of short-range missiles and threatened to attack the South, raising tension to one of its highest levels since the 1950-53 Korean War.

North Korea may also soon test a long-range missile capable of striking the U.S. and is possibly gearing up for skirmishes with the South around their disputed sea border, South Korean media reported on Monday.

Reuters contributed to this report.