Yun's remarks followed China's unilateral declaration on Saturday of an expanded "air defence identification zone" (ADIZ) in the East China Sea, that has sparked protests from the United States and Japan and expressions of regret from Seoul.
In a region already beset by long-standing territorial spats, the ADIZ issue "is making the situation all the more difficult" and adding to existing "competition and conflicts," Yun told a seminar hosted by the Korea Institute for Defence Analyses.
"In a broad general direction, regional cooperation and conflict management are possible," Yun was quoted by Yonhap news agency as saying.
"Having said that, however, if territorial conflicts and historical issues link up with nationalism, the situation in the region could deteriorate rapidly."
China announced the expanded air defence identification zone amid a sovereignty dispute with Japan over the island chain in the East China Sea known as the Senkaku in Japanese and Diaoyu in Chinese.
The area also includes waters claimed by Taiwan and South Korea.
Yun's remarks came hours after two American B-52 bombers flew over the disputed area without informing Beijing -- a clear warning that Washington would push back against what it considers an aggressive stance by Beijing.
The newly expanded zone overlaps slightly with South Korea's own air defence zone and incorporates a disputed, submerged, South Korean-controlled rock -- known as Ieodo -- that has long been a source of diplomatic tension with Beijing.
In an effort to strengthen its claim over Ieodo, South Korea built a maritime research station on the submerged rock in 2003 -- despite strong Chinese opposition.
"There will be no change in our usage of Ieodo because of the latest declaration of China's new air defence zone", Seoul foreign ministry spokesman Cho Tai-Young told journalists Wednesday.