By Zahra Hosseinian and Fredrik Dahl
TEHRAN (Reuters) - Iran test-fired nine missiles onWednesday and warned the United States and Israel it was readyto retaliate if they attacked the Islamic Republic over itsdisputed nuclear projects.
Washington, which says Iran seeks atomic bombs, told Tehranto halt further tests if it wanted the world to trust it.
Rising tensions have rattled financial markets. Oil prices,which have recently slipped from record highs, rebounded almost$2 a barrel after Wednesday's tests.
Speculation that Israel could strike Iran has mounted sinceits air force staged an exercise last month that U.S. officialssaid involved 100 aircraft. The United States has not ruled outmilitary action if diplomacy fails to resolve the nuclear row.
"We warn the enemies who intend to threaten us withmilitary exercises and empty psychological operations that ourhand will always be on the trigger and our missiles will alwaysbe ready to launch," Revolutionary Guards air force commanderHossein Salami said, according to ISNA news agency.
State TV showed missiles soaring into the sky from a desertlaunchpad and leaving long vapour trails.
Iran should "refrain from further missile tests if theytruly seek to gain the trust of the world," White Housespokesman Gordon Johndroe said.
"The Iranians should stop the development of ballisticmissiles, which could be used as a delivery vehicle for apotential nuclear weapon, immediately," he added.
Iran, the world's fourth largest oil producer, insists itsnuclear ambitions are purely directed at generatingelectricity.
State Press TV said the "highly advanced" missiles testedby the Guards included a "new" Shahab 3 missile, whichofficials have said could reach targets 2,000 km (1,250 miles)away. Iran has previously said Israel and U.S. bases are in itsrange.
'WAR OF WORDS'
Some U.S. facilities across the Gulf are little more than200 km from Iran's coast, putting them in range of Iranianweaponry even if analysts question their accuracy.
The United States also has troops based in nearby Arabstates, including Qatar and Bahrain, along with shipspatrolling the Gulf waterway.
Iran has previously said U.S. forces were vulnerablebecause of their presence in Iraq and Afghanistan. State TVsaid the missile has a one-tonne, conventional warhead.
Israel, believed to be the Middle East's only nuclear-armedpower, has vowed to prevent Iran from acquiring an atomic bomb.
"Israel does not threaten Iran, but the Iranian nuclearprogramme, combined with their aggressive ballistic missileprogramme, is a matter of grave concern," Mark Regev, spokesmanfor Israeli Prime Minister Ehud Olmert, said after the tests.
Leaders of the Group of Eight rich countries voiced seriousconcern on Tuesday at the proliferation risks posed by Iran'snuclear work. World powers have offered Iran incentives if itwill suspend uranium enrichment. Tehran has rejected thedemand.
Iran has threatened to close the Strait of Hormuz ifattacked. About 40 percent of globally traded oil moves throughthe Gulf waterway. The United States, which has ships andtroops in the area, has vowed not to let Iran shut any shippinglanes.
The war of words heightens risks that a misunderstanding ora minor clash in the Gulf, for instance, could get out of hand.
Tehran and Washington have not had diplomatic ties foralmost 30 years and have few avenues for direct communications.
An aide to Iran's Supreme Leader was quoted as saying onTuesday that his country would hit Tel Aviv, U.S. shipping inthe Gulf and U.S. interests in reply to any military strike.
CAUSING HAVOC
Analysts say Iran's military technology often involvesimproving weaponry originating in places like China and NorthKorea. While no match for U.S. firepower, they say Iran couldstill cause havoc in the region, if it was pushed.
"They are some way away yet from threatening Israel or U.S.bases," said London-based independent military analyst PaulBeaver, adding guidance systems over longer ranges needed work.But he said the missile programme was still "pretty advanced."
Other ground-to-ground missiles tested by naval and airunits of the Guards were the Zelzal and Fateh, with respectiveranges of 400 km and 170 km, state TV said.
After G8 leaders met in Japan, they urged Tehran to suspendall uranium enrichment activities, the work that most worriesthe West because it can have military as well as civilian uses.
(Additional reporting by Hossein Jaseb, Writing by FredrikDahl and Edmund Blair, editing by Alistair Lyon and CharlesDick)
