No oil will be permitted to pass through the key oil transit Strait of Hormuz if the West applies sanctions on Iran's oil exports, Iranian Vice President Mohammad Reza Rahimi warned on Tuesday.

The threat was reported by the state news agency IRNA as Iran conducted navy war games near the Strait of Hormuz, at the entrance of the oil-rich Gulf.

"If sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz," Rahimi was quoted as saying.

"We have no desire for hostilities or violence... but the West doesn't want to go back on its plan" to impose sanctions, he said.

"The enemies will only drop their plots when we put them back in their place," he said.

The threat underlined Iran's readiness to target the narrow stretch of water along its Gulf coast if it is attacked or economically strangled by Western sanctions over its nuclear program.

In Washington, US State Department deputy spokesman Mark Toner dismissed the latest Iranian remarks.

"I just think it's another attempt by them to distract attention from the real issue, which is their continued non-compliance with their international nuclear obligations," Toner told reporters.

The United States accuses Iran of using its uranium enrichment program to build nuclear weapons. Iran denies the charges.

More than a third of the world's tanker-borne oil passes through the Strait of Hormuz.

The United States maintains a navy presence in the Gulf in large part to ensure that passage remains free.

Iran is currently carrying out navy exercises in international waters to the east of the Strait of Hormuz.

Ships and aircraft dropped mines in the sea Tuesday as part of the drill, according to a navy spokesman.

Although Iranian war games occur periodically, the timing of these is seen as a show of strength as the United States and Europe prepare to impose further sanctions on Iran's oil and financial sectors.

The last round of sanctions, announced in November, triggered a pro-regime protest in front of the British embassy in Tehran during which Basij militia members overran the mission, ransacking it.

London closed the embassy as a result and ordered Iran's mission in Britain shut as well.

Tehran in September rejected a Washington call for a military hotline between the capitals to defuse any "miscalculations" that could occur between their militaries in the Gulf.

An Iranian lawmaker's comments last week that the navy exercises would block the Strait of Hormuz briefly sent oil prices soaring before that was denied by the government.

While the foreign ministry said such drastic action was "not on the agenda," it reiterated Iran's threat of "reactions" if the current tensions with the West spilled over into open confrontation.