The EU has formally agreed to an Iranian oil embargo - but a senior Iranian official has responded with defiance, saying the country "will definitely" close the Strait of Hormuz.
To protect Europe's economy, struggling with a two-year-old debt crisis, foreign ministers agreed to delay full implementation of the oil embargo until July 1, an EU diplomat said.
That will give countries such as Greece, which rely heavily on Iranian oil, to find alternative sources.
However, Tehran was defiant in the face of the embargo.
"If any disruption happens regarding the sale of Iranian oil, the Strait of Hormuz will definitely be closed," Mohammad Kossari, deputy head of parliament's foreign affairs and national security committee, told the Fars news agency.
Should that happen immediately it will hurt Greece and other EU countries such as Italy, already suffering heavily from the eurozone crisis.
A total of 35% of the world's tanker-borne oil exports pass through the strait, which the Iranians have declared they have the "right" to close before.
British Foreign Secretary William Hague called the embargo part of "an unprecedented set of sanctions".
"I think this shows the resolve of the European Union on this issue," Mr Hague said.
German Foreign Minister Guido Westerwelle said it was vital that action be taken.
"This is not a question of security in the region," he said. "It is a question of security in the world."
At a meeting in Brussels on Monday, ministers also approved sanctions against the central bank of Iran.
EU foreign policy chief Baroness Ashton said she hoped financial sanctions would persuade Tehran to return to negotiations with Western powers.
"I want to see Iran come back to the table and either pick up all the ideas that we left on the table ... last year ... or to come forward with its own ideas," she told reporters before the ministers' meeting.
Later, the UK, France and Germany also issued a joint statement calling on Iran to return to negotiations over its nuclear programme.
On Sunday, Britain joined the US and France in sending a flotilla of warships through the Strait of Hormuz in a pointed message to the Iranian regime.
The Ministry of Defence confirmed a Royal Navy Type 23 frigate, HMS Argyll, was part of the US-led carrier group to pass through the waterway without incident.
Iran insists its nuclear activities are aimed at producing energy, not arms.
But a senior British diplomat told Sky News: "There aren't any plausible peaceful reasons for the existence of Iran's 20% enrichment programme at Qom. It's extremely concerning.
"We're working 100% for a diplomatic solution. We want a diplomatic solution to this but all options remain on the table.
"We're doing this because we want Iran to engage on the key issue of their nuclear programme.
"The Iranians come to the table when they feel under pressure. They can stop the pressure. They know how to do so."
France's President Nicolas Sarkozy has accused Iran of lying and denounced what he called its "senseless race for a nuclear bomb", saying "time is running out" and "everything must be done" to avoid international military intervention.
In December the EU broadened its sanctions against Iran to target 180 new individuals and organisations linked to the Islamic Republic's shipping line and the Revolutionary Guards Corps.
The EU imported some 600,000 barrels of Iranian oil per day last year, according to the International Energy Agency, making it a key market alongside China, which has refused to bow to pressure from Washington and India.
About 20% of Iranian oil goes to China. China's co-operation is critical of the West's plan to force Iran to stop uranium enrichment is to succeed.
The Bushehr nuclear power plant in southern Iran
Like many other non-EU countries, China maintains normal co-operation with Iran in energy, economics and trade, which does not violate any of the four resolutions already adopted by the UN Security Council.
Iranian oil accounted for 34.2% of Greece's total oil imports, 14.9% of Spain's and 12.4% of Italy's in the first nine months of last year.
The problem for European governments has been to agree to implement an embargo that gives nations dependent on deliveries from Tehran time to phase out existing contracts.
Some countries, including Britain, France and Germany, wanted a three-month deadline, whereas financially-stressed nations such as Greece, Italy and Spain were requesting up to a year.
Greece is in dire financial trouble and relies heavily on low-priced Iranian oil.
The foreign ministers agreed in principle to make up the costs Greece incurs as a result of the embargo, a diplomat told AP.