The test came as Iran stepped up the rhetoric in its warnings of retaliation if attacked and conducted a military exercise in the Straits of Hormuz.

"The aim of these war games is to show we are ready to defend the integrity of the Iranian nation," Hossein Salami, Revolutionary Guards air force commander, was quoted as saying.

"Our missiles are ready for shooting at any place and any time, quickly and with accuracy. The enemy must not repeat its mistakes.  The enemy targets are under surveillance."

Consequences

But despite the threats, Robert Gates, the US defence secretary, said the US and Iran were no closer to a military confrontation.  

"The reality is there is a lot of signaling going on, but everybody recognises what the consequences of any kind of a conflict would be," he said.

Israel, which recently staged war games in the Mediterranean that were reportedly practice runs for an attack on Iran's nuclear facilities, also denied that is was seeking a conflict with Tehran. 

"Israel seeks neither conflict nor hostilities with Iran, but no one in the international community should remain indifferent to Iran's nuclear programme and Iran's ballistic missile programme," Mark Regev, an Israeli government spokesman, said. 

The test launch came on the same day that a US foreign affairs commitee began delivering a report on the state of relations between the US and Iran.
 
William Burns, under-secretary of state for political affairs, said Iran should move towards a "co-operative and constructive" path.
 
"Until that time, however, the US and the international community remain committed to meeting the challenges posed by Iran," he told the congressional hearing.
 
Burns called for "tough minded diplomacy, maximising pressure on the Iranians at multiple points to drive home the costs of continued defiance of the rest of the world, especially on the nuclear issue".

Diplomacy

Michael Williams, head of the transatlantic programme at the Royal United Services Institute in London, told Al Jazeera: "Diplomacy is being backed by the threat of a military strike at some point; it remains on the table.

"Quite frankly, there is a palpable fear in Europe about the Iranian nuclear programme; one, they are very concerned about the implications of Iran developing a nuclear weapon ... and secondly they are worried that the Israelis are seeing a window closing and that there may be strikes against Iran that would then cause things to spiral out of control."

Iran has repeatedly denied accusations that it is developing a nuclear programme in order to build atomic weapons, and earlier this week it sent a response to a  package of economic incentives aimed at pushing it to halt uranium enrichment.

EU officials have said they are still evaluating the response, but Tehran has insisted it will not suspend enrichment.