The United States and its allies accuse Iran of trying to develop nuclear payloads for missiles. Tehran denies the charge, saying it needs the technology to generate electricity and produce radioisotopes to treat cancer patients.

Tension has been growing between Iran and the West since a report by the United Nations nuclear inspection agency in November expressed serious concerns about a possible military dimension to the country’s nuclear program.

Iran had said that it would be forced to manufacture the rods because it is barred from buying them on foreign markets. The tubes contain pellets of enriched uranium that provide fuel for nuclear reactors.

The Islamic Republic News Agency, or IRNA, reported that the nuclear fuel rod had “passed all physical and dimensional tests” and had been inserted into the core of Tehran’s research reactor.

REPORTING FROM TEHRAN AND BEIRUT -- Iran said Sunday that its scientists had produced the country’s first nuclear fuel rod and its navy had test-fired a new medium-range surface-to-air missile, announcements that were likely to heighten concerns about the country’s disputed uranium-enrichment program.

This post has been updated. See the note below for additional details

[Updated 3:38 p.m. Jan. 1: The State Department had no immediate comment Sunday on the Iranians’ statement that they had produced a fuel rod.

A physicist who tracks nuclear defense issues, Edwin Lyman, said the claim had “no direct relationship to weapons development” by the Iranians. However, he added, “it does say something generally about their increasing sophistication in nuclear fabrication.”

The ability to manufacture fuel rods, if true, reveals that Iran has “expertise that could be transferred to weapons development,” said Lyman, senior scientist for the Union of Concerned Scientists in Washington.]

On Saturday, President Obama signed a defense bill that includes new penalties against financial institutions that do business with the Islamic Republic’s central bank, an attempt to hamper Tehran’s ability to fund the program. The head of Iran's Chamber of Commerce, Mohammad Nahavandian, dismissed the move Sunday.

"The Iranian nation and those involved in trade and economic activities will find other alternatives," Nahavandian was quoted as saying by the semi-official Iranian Students News Agency, or ISNA.

The European Union is also considering additional measures that could include an embargo on Iranian oil imports, a vital source of hard currency for Tehran.

Iranian officials have threatened to retaliate by closing the strategic Strait of Hormuz to oil tanker traffic, although they later appeared to back down by saying the country would not do so for now.

On Saturday, Iran’s top nuclear negotiator, Saeed Jalili, said the country had proposed a new round of talks with the United States, Russia, China, Britain, France and Germany, according to IRNA. The last negotiations between Iran and the group -- the five permanent members of the U.N. Security Council plus Germany -- were held in January in Istanbul, Turkey.

Nader Karim Noni, an analyst who writes in reformist newspapers, said Iran wants to “show teeth” ahead of any further talks about its nuclear program.

State TV reported that the new missile was tested during military exercises in international waters near the Strait of Hormuz.

"It's equipped with state-of-the-art technology and a built-in system that enables it to thwart jammers," Rear Adm. Mahmoud Mousavi, a spokesman for the exercise, was quoted as saying.

A prominent Iranian lawmaker, Ismail Kowsari, told the semiofficial Fars news agency that the 10-day drill was part of preparations to block the channel if sanctions were imposed. But Mousavi reiterated that there were no plans to do so.

"We won't disrupt traffic through the Strait of Hormuz," ISNA quoted Mousavi as saying. "We are not after this."

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-- Ramin Mostaghim in Tehran and Alexandra Zavis in Beirut. Times staff writer Tom Hamburger in Washington contributed to this report.

Photo: Iranian navy boats conduct maneuvers Friday in the Sea of Oman. On Sunday, Iranian officials announced the test launch of a new medium-range surface-to-air missile. Credit: Ali Mohammadi / Associated Press