Iraq has denied any connection to an oil tanker seized by Iran for allegedly smuggling fuel, in the latest escalation of a diplomatic crisis gripping the Gulf.

It is the third foreign tanker that Iranian forces have detained in less than a month near to or in the strategic Strait of Hormuz.

The British-flagged Stena Impero was seized on 19 July, also for so-called “marine violations” and remains under Iranian control.

On Monday Mohammed Javad Zarif, Iran’s foreign minister, threatened legal action against the UK over the tanker, accusing Britain of “piracy”.

Iranian media initially reported that the Iraqi ship was intercepted for diesel smuggling near Farsi Island, north of the Strait, where the elite Revolutionary Guards Corps (IRGC) have a naval base. Iranian officials claimed some 700,000 litres of fuel were on board.

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However, Iraq’s oil ministry has denied links to the ship.

“The ministry does not export diesel to the international market,” it said in a statement.

Two Iraqi port officials said initial information pointed to the fact it was a “small ship” run by a private shipping company which was owned by an Iraqi private trader.

Iranian state media claimed the Iraqi ship was attempting to smuggle fuel “for some Arab countries”.

Guards commander Ramezan Zirahi told Iran’s semi-official Fars news agency it was carrying 700,000 litres of fuel but did not elaborate on the nationalities of the detained crew.

“The boats of the IRGC navy were patrolling the area to control traffic and detect illicit trade when they seized the tanker,” he added.

It comes amid soaring tensions between Iran, the west and its allies, that first erupted in May when the United States unilaterally pulled out of a 2015 nuclear agreement which curbed the Islamic Republic’s nuclear programme in exchange for the easing of sanctions.

Furious with the additional sanctions, Tehran decreased its commitments to the deal which it has threatened to leave, and promised to block all exports through the Strait of Hormuz, if countries heeded Washington’s calls to stop buying Iranian oil.

It then captured Panama-flagged MT Riah in the Strait for allegedly smuggling fuel. The crew were finally released.

But shortly afterwards the Guards seized British-flagged tanker Stena Impero in the same area for alleged marine violations. It came two weeks after British forces captured an Iranian oil tanker near Gibraltar accused of violating sanctions on Syria.

The UK has now sent an additional warship to the Strait to escort British ships and has called for the formation of a European task force to patrol the waterways, further ratcheting up tensions.

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On Monday Mr Zarif accused Britain of “piracy” and being complicit in “US economic terrorism”. He threatened legal action over the alleged violations the Stena Impero committed.

“[The] Gulf will never close [its] eyes anymore … Iran is responsible for the security and safety of the Strait of Hormuz and the region,” he said in a televised speech broadcast by state media.