Two US journalists reportedly seized by North Korean guards on border with China.
The “war games”, which ended on Friday, was described by Pyongyang as a rehearsal for invasion.
It is considered by Washington and Seoul as routine defence drills.
The developments come amid tension on the Korean peninsula over the North’s announced plans to fire a satellite in early April, a move several regional powers have said is merely cover for a test of missile technology.
North Korea said on Friday it would convene its parliament on April 9, just after the planned launch.
The “hotline” is the only means of quick communication between the two Koreas and is vital for co-ordinating the passage of people and goods across their border.
The repeated closures have called into question the future of the factory, a joint economic venture once hailed as a promising example of inter-Korean co-operation and a key source of hard currency for the impoverished North.
Since the war games began, North Korean officials had refused three times to let South Korean workers commute to and from jobs at the industrial park in Kaesong, leaving hundreds stranded in North Korea.
Hong Yang-ho, the vice unification minister, said on Friday shutting down the complex was not an option.
But he said the border closures were causing “serious economic damage” and warned the North it would be held responsible for losses.