TEHRAN // Iran defiantly said yesterday that it had tested a new missile and made an advance in its nuclear programme after the US unleashed extra sanctions that sent its currency to a record low.
The developments raised the stakes in a confrontation between the longtime foes, as concerns mounted that Iran could make good on threats to close the world's most important oil route, the Strait of Hormuz in the Gulf, if it is backed against a wall.
Ten days of Iranian naval war games were to climax today, with vessels practising a new tactical formation to be used to close the strait if so ordered, the navy spokesman, Commodore Mahmoud Mousavi, was quoted as saying by Iran's ISNA news agency.
Yesterday "for the first time, an anti-radar medium-range missile was successfully fired during the massive naval drills", said Commodore Mousavi said.
The Iranian Atomic Energy Organisation followed that up with its own announcement that its scientists "tested the first nuclear fuel rod produced from uranium ore deposits inside the country".
The statement suggested Iran had made progress in becoming a self-sufficient nuclear nation and had technological prowess the West thought it lacked. It also fed into broader fears that Iran's real aim is to develop a capability to enrich uranium to the 90 per cent level necessary for a nuclear bomb - an ambition Tehran denies.
The fears are at the heart of the western push to halt Iran's nuclear programme through sanctions.
The US president, Barack Obama, on Saturday signed into law the latest such package, measures targeting Iran's central bank and financial sector. Iran's currency, the rial, slipped to a record low yesterday.
The state news agency, IRNA, and an Iranian website tracking the currency said it slid to about 16,000 to the US dollar.
Iran's president, Mahmoud Ahmadinejad, told an annual meeting of senior central bank officials that their institution was "the backbone of dealing with the enemies' pressure".
He said the bank "must with strength and self-confidence have the solidity to eliminate all of the enemies' plots", read a statement on the government's website.
Mr Ahmadinejad said that "currently there is no particular problem in the economic sector".
The extra US sanctions aim to further squeeze Iran's crucial oil sales, most of which are processed by the central bank.
They will make foreign firms choose between doing business with the Islamic republic or the economically mighty US.
Iran, the biggest producer in Opec after Saudi Arabia, depends on oil sales for 80 per cent of its foreign currency earnings.
The European Union was also mulling an embargo on Iranian oil purchases and a decision could be announced at an EU foreign ministers' meeting at the end of the month.
Iranian leaders and military officials have warned that additional western sanctions could push them to close the strategic Strait of Hormuz at the entrance to the Gulf.
About 40 per cent of the world's tanker-borne oil passes through the strait.
The warnings became more strident in recent days, with the vice president, Mohammad Reza Rahimi, vowing last Tuesday that "not a drop of oil will pass through the Strait of Hormuz" if more sanctions were imposed.
Oil prices spiked on that declaration before subsiding somewhat on analysts' views that Iran would devastate its own economy by taking such a drastic step.
It would also lose the international diplomatic protection it enjoys from Russia and China, they said.
The US navy also said it would not tolerate any such closure.
The Strait of Hormuz is the "most important choke point" globally, according to the US Energy Information Administration.