Iran test-fired ballistic missiles capable of striking targets across the Middle East yesterday as more details emerged on the scope of the US military build-up in the Arabian Gulf.
Tensions have soared since European Union and US sanctions targeting Iran's vital oil exports went into full effect in recent days. They are aimed at curbing Tehran's nuclear ambitions.
Yesterday's posturing from both sides came as technical experts from Iran and six world powers, including the US, met in Istanbul for the latest round of nuclear negotiations.
Three earlier bouts of higher level diplomatic talks since April failed to make a breakthrough. They were bedevilled by mutual mistrust and demands that the other side make the first concession in a game of nuclear brinkmanship.
Even so, neither Iran nor the west wants to call a halt on diplomacy because it could lead to a catastrophic Israeli strike on Iran's nuclear facilities that would send oil prices soaring and convince Tehran it needs the bomb.
The acting commander of Iran's Revolutionary Guards proclaimed his force's "Great Prophet 7" missile war games in a central desert area were intended to warn Israel and the US of the folly of attacking Iran.
"It is a response to the political impoliteness of those who talk about all options being on the table," Gen Hossein Salami said.
Israel repeatedly has threatened it could attack Iran if diplomacy fails to rein in its nuclear programme, and the US also has military force on the table as a last resort. But the US has urged Israel to give sanctions and diplomacy a chance.
The chief of the Revolutionary Guards airspace unit, Gen Ami Ali Hajizadeh, warned on Monday that if Israel attacked Iran's nuclear facilities it would give Tehran a reason to "remove Israel from the earth".
He also boasted that Iran has produced an anti-radar missile called "Arm" that could damage US-supplied missile shields in Gulf Arab countries and Turkey.
Washington matched Iran's bellicose rhetoric while both sides insisted their military measures were purely "defensive" in nature.
If Iranian "fast boats" attempt to harass US warships or commercial shipping in the Strait of Hormuz, "we'll put them on the bottom of the Gulf", an unnamed US senior defence department official told The New York Times yesterday.
The US navy has doubled the number of its minesweepers in the region to eight, while extra warplanes have been deployed to regional bases to reinforce existing carrier groups, the paper reported.
Iranian hardliners are urging their regime to close the Strait of Hormuz at the mouth of the Arabian Gulf as "legitimate leverage" against "bullying by the west and its allies".
One fifth of the world's traded oil passes through the strait and Washington repeatedly has warned that Iran's closing it would cross a red line.
Iran is keen to demonstrate it will not passively soak up an "illegal and unjust" onslaught on the nerve centre of its economy. But neither does Tehran want to provide Washington with an excuse for military retaliation.
Instead, Iran experts said, Tehran could strike back through measures carefully calibrated to rattle global oil markets but fall short of providing the US with justification to retaliate.
War games, like those under way this week, and defiant rhetoric are two options. Another would be for Iran to announce major new advances in its nuclear programme, which Tehran insists is solely peaceful in nature.
Iranian payback could also come in a cyber-attack on computer-managed Arab oil production facilities in the Gulf, which Tehran could vociferously deny.
"But what is significant is that Iran hasn't cut off the nuclear talks," said Scott Lucas, an Iran expert at Birmingham University in England. Even so, he warned: "The West keeps hitting the accelerator on sanctions and the Iranians keep refusing to swerve by making concessions. The big unknown is what will happen if they crash."
Iran's president, Mahmoud Ahmadinejad, said yesterday that the latest EU sanctions on the sale of Iranian oil are "the strongest" measures yet imposed on the country.
In his first comments since the EU ban on the purchase of Iranian oil took effect on Sunday, Mr Ahmadinejad said "the sanctions imposed on our country are the strongest ones that have ever been applied against a country". Speaking on Iranian state television, he added: "Our enemies assume that they are able to corner Iran in a weak position with these sanctions."
But he added that Iran should view the EU ban "as an opportunity to wean the country's budget off its dependence on oil revenues", saying that it would "remove the weapon of oil from the enemy's hand forever".
