Donald Trump has signed an executive order targeting Iran's Supreme Leader and his associates with financial sanctions, the latest action the US has taken to discourage Tehran from developing nuclear weapons and supporting militant groups.

Key points: The sanctions are aimed at denying access to the US financial systems

The sanctions are aimed at denying access to the US financial systems The US claims its drone was flying over international waters

The US claims its drone was flying over international waters Iran warned it would not hesitate to shoot other US drones in its airspace

The sanctions follow Iran's downing of a US surveillance drone over the Strait of Hormuz.

The US President pulled back from the brink of retaliatory military strikes on Iran last week, but is continuing his pressure campaign against the nation.

"These measures represent a strong and proportionate response to Iran's increasingly provocative actions," Mr Trump told reporters in the Oval Office.

"We will continue to increase pressure on Tehran until the regime abandons its dangerous activities and its aspirations."

Mr Trump added that these included "the pursuit of nuclear weapons, increased enrichment of uranium, development of ballistic missiles, engagement and support for terrorism, fuelling of foreign conflicts and belligerent acts directed against the United States and its allies".

Last year, Mr Trump pulled the US out of the nuclear pact that world powers made with Tehran in 2015.

Other nations stayed in the deal, which eased sanctions on Iran in exchange for curbing its nuclear program.

Mr Trump called it a one-sided deal in Iran's favour and reimposed sanctions, but said he wanted to negotiate a different deal.

Iran, which calls the sanctions "economic terrorism," has thus far shown no interest in negotiating.

Sanctions in response to Iranian threats: Trump

US President Donald Trump and Iran's Supreme Leader Ayatollah Ali Khamenei. ( AP/Reuters )

The latest round of sanctions denies Supreme Leader Ayatollah Ali Khamenei and senior military figures access to financial resources and blocks their access to any financial assets they have under US jurisdiction.

"For people who say these are just symbolic, that's not the case at all," US Treasury Secretary Steven Mnuchin said.

"We've literally locked up tens and tens of billions of dollars."

Mr Trump said the new sanctions were not only in response to the downing of the drone.

The US has blamed Iran for attacks on two oil tankers this month near the Strait of Hormuz.

In response, the US has sent an aircraft carrier to the Persian Gulf region and deployed additional troops alongside the tens of thousands already there.

Iran has denied any involvement.

All this has raised fears that a miscalculation or further rise in tensions could push the US and Iran into an open conflict 40 years after Tehran's Islamic Revolution.

"The Supreme Leader of Iran is the one who is ultimately responsible for the hostile conduct of the regime," Mr Trump said.

"He is respected within his country. He also oversees the regime's most brutal instrument, including the Islamic Revolutionary Guard."

Pompeo in the Middle East

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 45 seconds 45 s The Iranian military released this video claiming to show drone being shot down

Iran's naval commander has warned that Iranian forces would not hesitate to act again and shoot down more US surveillance drones that violate Iranian airspace. The US said the drone shot down last week was flying over international waters.

"We confidently say that the crushing response can always be repeated, and the enemy knows it," Rear Admiral Hossein Khanzadi was quoted as saying by the Tasnim news agency.

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The sanctions came as Secretary of State Mike Pompeo held talks with officials in the United Arab Emirates and Saudi Arabia about countering the military threat from Iran by building a broad, global coalition that includes Asian and European countries.

Mr Pompeo is likely to face a tough sell in Europe and Asia, particularly from those nations still committed to the 2015 nuclear deal.

Germany, France and Britain, as well as Russia and China, remain part of the nuclear accord that lifted sanctions on Iran in exchange for set limits on its uranium enrichment levels.

The three European countries have sent envoys to Tehran recently, signalling they remain committed to diplomacy and dialogue.

They cautioned against moves that can lead to conflict between the US and Iran.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 17 seconds 17 s The attacks left one tanker on fire and all sailors were evacuated from both ships

AP/ABC