"North Korea's launch of an ICBM is a clear and sharp military escalation," Haley told an emergency meeting of the council following the watershed missile test that Kim Jong-Un dubbed a gift to "American bastards."
"In the coming days, we will bring before the Security Council a resolution that raises the international response in a way that is proportionate to North Korea's new escalation," she said.
Haley said she had spoken to President Donald Trump earlier in the day about using trade restrictions to target countries that continue to have dealings with North Korea.
"The United States is prepared to use the full range of our capabilities to defend ourselves and our allies," she said.
"One of our capabilities lies with our considerable military forces. We will use them if we must. But we prefer not to have to go in that direction," Haley said.
"We have other methods of addressing those who threaten us, and of addressing those who supply the threats. We have great capabilities in the area of trade."
'Not an option': China
China told the UN Security Council military action was "not an option" for addressing the crisis over North Korea.
"China has always been firmly opposed to chaos and conflict on the Korean peninsula. Military means must not be an option in this regard," Chinese Ambassador Liu Jieyi told an emergency session of the council.
The council was meeting in an emergency session called by the United States, Japan and South Korea to agree on a response to the ICBM test on Tuesday that experts said was capable of reaching Alaska.
France said it backed plans for a new resolution that Ambassador Francois Delattre said should "clearly support tightening and strengthening sanctions against the North Korea regime."
The Security Council adopted two sanctions resolutions last year to ramp up pressure on Pyongyang and deny leader Kim Jong-Un the hard currency needed to fund his military programs.
Those resolutions provided for significant curbs on North Korea's coal exports, a major source of revenue, restrictions on banking and mandatory searches of all cargo to and from North Korea.
In all, six sets of sanctions have been imposed on North Korea since it first tested an atomic device in 2006.
