US President Donald Trump has vowed to impose fresh sanctions on Iran and said military action was still "on the table" as tensions continued to rise in the Gulf following the downing of an unmanned US drone by Iranian forces.
Trump's threat on Saturday came as Tehran warned Washington that "one bullet towards Iran" would cause its interests across the Middle East to go up in flames.
Washington claims the incident happened in international airspace, but Tehran said the drone was shot down over its territory. Trump said the US planned retaliatory attacks on Iran, but he called them off because 150 people could have been killed.
Speaking in Washington, DC, before heading to the US presidential retreat at Camp David, where he said he would deliberate on Iran, Trump said his administration intended to pile economic pressure on Tehran.
"We are putting additional sanctions on Iran," Trump told reporters. "In some cases, we are going slowly, but in other cases, we are moving rapidly."
Military action was "always on the table", he said, but added that he was open to quickly reaching a deal with Iran that he said would bolster the country's flagging economy.
"We will call it 'Let's make Iran great again'," Trump said.
He also said "we very much appreciate" a decision by the IRGC not to shoot down a US spy plane carrying more than 30 people.
Later on Saturday, Trump said the new US sanctions will be announced on Monday.
"We are putting major additional Sanctions on Iran on Monday," Trump tweeted, adding: "I look forward to the day that Sanctions come off Iran, and they become a productive and prosperous nation again - The sooner the better!"
Al Jazeera's John Hendren, reporting from Washington, DC, said Trump's comments appear to be aimed at defusing the festering frictions.
"Let's make Iran great again does not sound very bellicose. It's a different tune for Trump to be singing. There is a sense of relief here in the US that we are not in the middle of a major conflict."
Worries about a confrontation between Iran and the US have mounted despite Trump saying he has no appetite for war.
Tehran has also said it is not seeking a war but has warned of a "crushing" response if attacked.
"Firing one bullet towards Iran will set fire to the interests of America and its allies" in the region, armed forces general staff spokesman Brigadier General Abolfazl Shekarchi told the Tasnim news agency.
"If the enemy - especially America and its allies in the region - make the military mistake of shooting the powder keg on which America's interests lie, the region will be set on fire," Shekarchi warned.
Iran's Foreign Minister, Mohammad Javad Zarif, published a map on Twitter with detailed coordinates which he said showed the drone was flying over the Islamic Republic's territorial waters.
But a Pentagon spokeswoman, Commander Rebecca Rebarich, said on Saturday: "We stand by where we said the aircraft was operating in international airspace."
Iran's Foreign Ministry summoned a United Arab Emirates envoy on Saturday because the UAE allowed the drone to be launched from a US military base on its territory, the Fars news agency reported.
A day earlier, Iran had summoned Swiss Ambassador Markus Leitner to lodge its protest over the alleged drone violation. Switzerland looks after the US interests in Iran. Tehran and Washington have had no diplomatic relations since 1979.
Call for diplomacy
Tensions in the region began to worsen significantly when Trump pulled out of a 2015 nuclear deal between Iran and six powers and reimposed sanctions on the country. The sanctions had been lifted under the pact in return for Tehran curbing its nuclear programme.
The US and its ally Saudi Arabia have also blamed Iran for attacks on two oil tankers last week in the Gulf of Oman and on four tankers off the UAE on May 12.
Both incidents happened near the strategic Strait of Hormuz, a major conduit for global oil supplies.
Iran has denied any involvement in those incidents, but world powers are calling for calm and sending in envoys for talks to try to lower the tensions as the dispute has pushed the oil prices up.
The United Kingdom's Minister of State for the Middle East, Andrew Murrison, would visit Tehran on Sunday to raise concerns about "Iran's regional conduct and its threat to cease complying with the nuclear deal", the Foreign & Commonwealth Office said.
German Chancellor Angela Merkel also called for a political resolution of the crisis, adding: "That is what we are working on."
Iran has threatened to breach the deal if the European signatories to the agreement fail to salvage it by shielding Tehran from US sanctions.
"The Europeans will not be given more time beyond July 8 to save the deal," said Abbas Mousavi, a spokesman for Iran's Foreign Ministry, referring to its deadline of 60 days announced in May.
Separately, Iran has executed a former contract employee of the aerospace organisation of the Ministry of Defence on charges of spying for the American agency CIA, the IRIB news agency reported on Saturday.
Jalal Hajizavar was convicted by a military court after an investigation which discovered documents and spying equipment at his home, the report said.