Iran's enthusiastic guardianship of its sovereignty appears to have extended to international air travel.

From now on, the Iranian government has announced, any airline which refers to the waterway between Iran and Arab states as the Arabian Gulf rather than the Persian Gulf will be banned from its airspace.

"The airlines of the southern Persian Gulf countries flying to Iran are warned to use the term Persian Gulf on their electronic display boards," the country's transport minister, Hamid Behbahani, told the Daily Iran newspaper.

"Otherwise they will be banned from Iranian airspace for a month the first time and upon repetition their aircraft will be grounded in Iran and flight permits to Iran will be revoked."

Although the warning seems to be aimed at airlines based in neighbouring countries, the newspaper reported that Iran has also punished a foreign employee of one of its own airlines for making the same mistake.

It said that a Greek employee of Iranian commercial carrier Kish Air had been fired for using the term Arabian Gulf on a display board, and the airline had been asked to apologise over the incident.

Last month the Saudi-based Islamic Solidarity Sports Federation said it had made the decision to scrap the Islamic Solidarity Games which were to be held in Iran in April because of a dispute over whether the Gulf waterway is Arab or Persian.

Designation of the key waterway for global oil and gas supplies has long been a touchy issue among the countries bordering it – Saudi Arabia, Kuwait, Qatar, Bahrain, the United Arab Emirates, Oman, Iraq and Iran.

Iran says it is the Persian Gulf; the Arab states say it is Arab. Foreign language descriptions can offend either party if they use one name or the other, or decide to omit an adjective altogether.

The directive from Tehran also reflects international tensions over Iran's nuclear enrichment activities.

Some Gulf Arab states – many of which buy large quantities of US weapons and offer facilities to US military forces – share Washington's concerns that Iran is seeking to develop a nuclear weapons capability.

The dispute over Iran's nuclear energy programme, which Tehran says is aimed solely at generating electricity, is part of a wider concern among Sunni Muslim-led Arab governments over Iranian expansionism in the Middle East.

Iran has a network of allies including Shia groups in power in Iraq, the Syrian government, Lebanon's Hizbullah and the Palestinian Islamist group Hamas that rules Gaza.