TEHRAN Iranian President Mahmoud Ahmadinejad was unharmed when a homemade explosive went off near his motorcade during a visit to the western city of Hamadan on Wednesday, a source in his office said.
But state media said only a firecracker had been set off by an young man excited to see the president and a police chief called news of an attack a "big lie" spread by foreign media.
The source from Ahmadinejad's office said the president's convoy was targeted as he was traveling from Hamadan airport to give a speech in a sports arena. The president was unhurt but others were injured and one person was arrested, he said.
"There was an attack this morning. Nothing happened to the president's car," the presidential office source told Reuters. "Investigations continue ... to find out who was behind it."
Ahmadinejad, who has cracked down on opposition since a disputed June 2009 presidential election, appeared on live Iranian television at the sports stadium. He looked unperturbed and made no mention of any assault.
The populist, hardline Ahmadinejad has accumulated enemies in both conservative and reformist circles in the Islamic Republic, as well as abroad.
But state news agency IRNA said "an excited young man from Hamadan exploded a firecracker in order to express his happiness. It did not cause any disturbance among the crowd which was giving a warm welcome to the president."
The media was to blame, it said.
"Some foreign media tried to take advantage of this event, in line with their goals," IRNA said without elaborating. "Some domestic media called this harmless firecracker a grenade explosion and some called it a hand-made grenade and this led to some ambiguity."
Iran's Deputy Police Chief Ahmadreza Radan said foreign news media wanted to exploit the situation by publishing false news.
"It's a big lie that some foreign media published and wanted to spread," the semi-official Fars news agency quoted him as saying.
Ahmadinejad's government is facing economic pain as new foreign sanctions imposed over Iran's disputed nuclear energy program bite on the world's fifth biggest oil exporter.
Iranian leaders have responded to the pressure by accusing the West of plotting against the Islamic Republic and saying domestic opponents are in league with foreign powers.
During a speech to a conference of expatriate Iranians in Tehran on Monday, Ahmadinejad said he believed he was the target of an assassination plot by Israel. "The stupid Zionists have hired mercenaries to assassinate me," he said.
One of Ahmadinejad's trademarks has been constant travel around his vast country to deliver rousing speeches before outwardly adoring crowds who shout "death" to Iran's foes.
The oil market initially reacted calmly to reports of the attempted attack. Iran gets just under half of its revenue from oil and gas and would benefit from any rise in prices.
"I expect that any backlash there might be from Ahmadinejad will be far more important to the oil market than the initial attack itself," said Paul Harris, head of natural resources risk management at Bank of Ireland.
But judging from the reaction of state media, it appeared for now that authorities were keen to downplay the event.
Several armed groups opposed to the government are active in Iran, mostly made up of ethnic Kurds in the northwest, Baluch in the southeast and Arabs in the southwest.
The banned Mujahideen Khalq, listed by the United States as a terrorist group, carried out many anti-government attacks and assassinations after the 1979 Islamic revolution.
But Shahin Gobadi, French-based spokesman for the Mujahideen, denied involvement.
Asked if his group was behind the attack, he said: "Absolutely not, absolutely not. It has nothing to do with us. I don't know what happened, but it has nothing to do with us."
Ahmadinejad recently sought to isolate rival political factions by declaring that "the regime has only one party, which is the velayat" -- a reference to Shi'ite Islam's hidden Imam, for now represented by Supreme Leader Ayatollah Ali Khamenei.
Just as combative toward external pressure, the president has derided sanctions over Iran's nuclear program as "pathetic" and vowed to pursue what Iran says is a quest for nuclear energy, not weapons as the West believes.
(Additional reporting by Alistair Lyon in Beirut; Writing by Mark Heinrich and Jon Hemming; Editing by Peter Millership)