TEHRAN (Reuters) - Iran test-fired nine missiles on Wednesday and warned the United States and Israel it was ready to retaliate if they attacked the Islamic Republic over its disputed nuclear projects.

Washington, which says Iran seeks atomic bombs, told Tehran to halt further tests if it wanted the world to trust it. Iran, the world’s fourth largest oil producer, insists its nuclear program aims only at generating electricity.

Rising tensions have rattled financial markets. Oil prices, which had slipped from record highs, rebounded about $2 a barrel after Wednesday’s tests.

Speculation that Israel could strike Iran has mounted since its air force staged an exercise last month that U.S. officials said involved 100 aircraft. The United States has not ruled out military action if diplomacy fails to resolve the nuclear row.

“We warn the enemies who intend to threaten us with military exercises and empty psychological operations that our hand will always be on the trigger and our missiles will always be ready to launch,” Revolutionary Guards air force commander Hossein Salami said, according to ISNA news agency.

In televised comments, he said thousands of missiles were ready to be fired at “specific and pre-determined targets”. Missiles were shown soaring from desert launchpads, leaving long vapor trails.

Iran should “refrain from further missile tests if they truly seek to gain the trust of the world,” White House spokesman Gordon Johndroe said.

MISSILE SHIELD

U.S. Secretary of State Condoleezza Rice suggested the tests justified an American missile shield plan with bases in eastern Europe that Russia strongly opposes.

“Those who say that there is no Iranian threat against which to be building missile defenses perhaps ought to talk to the Iranians about ... the range of the missiles that they test fired,” Rice said in Bulgaria.

Russia, which has resisted U.S. calls for tougher U.N. sanctions on Iran, nevertheless says it shares concerns about Tehran’s nuclear program. It responded to an Iranian rocket test in February by questioning Tehran’s motives.

Italy joined criticism of Iran’s latest missile tests.

“These are very dangerous missiles -- that’s why the international community and not just Israel has an interest in blocking this escalation in a definitive way,” Italian Foreign Minister Franco Frattini said in Ramallah, in the West Bank.

A video grab from Al Alam television shows three of nine long- and medium-range missiles being fired during a test in Iran July 9, 2008. REUTERS/Iran tv via Reuters TV

Iran’s State Press TV said the “highly advanced” missiles tested by the Guards included a “new” Shahab 3 missile, which officials have said could reach targets 2,000 km (1,250 miles) away. Iran has said Israel and U.S. bases are in its range.

Some U.S. facilities across the Gulf are little more than 200 km from Iran’s coast, putting them well within range of Iranian missiles, even if analysts question their accuracy.

The United States also has forces based in nearby Arab states, including Qatar and Bahrain, along with ships patrolling the Gulf waterway.

Iran has said U.S. forces are vulnerable because of their presence in two of its neighbors, Iraq and Afghanistan.

Israel, believed to be the Middle East’s only nuclear-armed power, has vowed to prevent Iran from acquiring an atomic bomb.

“Israel does not threaten Iran, but the Iranian nuclear program, combined with their aggressive ballistic missile program, is a matter of grave concern,” Mark Regev, spokesman for Israeli Prime Minister Ehud Olmert, said after the tests.

Leaders of the Group of Eight rich countries voiced serious concern on Tuesday at the proliferation risks posed by Iran’s nuclear work. World powers have offered Iran incentives if it will suspend uranium enrichment. Tehran has rejected the demand.

Iran has threatened to close the Strait of Hormuz, conduit for about 40 percent of globally traded oil, if it is attacked. The U.S. military says it will prevent any such action.

The war of words heightens risks that a misunderstanding or a minor clash in the Gulf, for instance, could get out of hand.

Tehran and Washington have not had diplomatic ties for almost 30 years and have few avenues for direct communications.

An aide to Iran’s Supreme Leader was quoted as saying on Tuesday that his country would hit Tel Aviv, U.S. shipping in the Gulf and U.S. interests in reply to any military strike.

Analysts say Iran’s military technology often involves improving weaponry originating in China and North Korea.

“They are some way away yet from threatening Israel or U.S. bases,” said London-based independent military analyst Paul Beaver, adding guidance systems over longer ranges needed work. But he said the missile program was still “pretty advanced.”