Iran denies market talk of strike on atomic sites

By Parisa Hafezi

TEHRAN (Reuters) - A senior Iranian nuclear official denied on Tuesday rumors of a strike on the country's nuclear sites that had unsettled financial markets.

"This is just a rumor. No attack against Iran's nuclear facilities has taken place," the official told Reuters, days after a report that Israeli jets had rehearsed a possible strike on the Islamic Republic.

In Jerusalem, an Israeli army spokesman told Reuters on Tuesday: "We are not aware of any such incident in Iran."

The New York Times on Friday quoted U.S. officials as saying Israel had carried out a large military exercise, apparently a rehearsal for a potential bombing of Iran's nuclear facilities.

The report of the Israeli maneuvers has raised speculation about a possible attack on nuclear sites, which Israel and the United States say Iran is using to master technology so it can build nuclear weapons.

Iran denies the charge and insists its nuclear ambitions have the peaceful aim of generating electricity.

Washington says it wants a diplomatic solution to the nuclear row but has not ruled out military action if that route fails.

In response to Tuesday's rumor, a spokeswoman for the U.S. Fifth Fleet in Bahrain denied there had been any U.S. military strike against Iran.

"SEVERE ANSWER"

Following the market rumor, commander-in-chief of Iran's elite Revolutionary Guards Mohammad Ali Jafari warned the "enemy" over the consequences of any attack on the Islamic state, the official IRNA news agency reported.

"If the enemy makes a strategic mistake (by attacking), the Revolutionary Guards are fully prepared to give a severe answer to the enemy," IRNA quoted Jafari as saying.

Iran's Revolutionary Guards was set up after the 1979 Islamic revolution to protect the clerical ruling system and revolutionary values. It answers to Supreme Leader Ayatollah Ali Khamenei, Iran's top authority.

It has an estimated 125,000-strong military with army, navy and air units. The Corps also is in charge of Iran's most advanced missile systems like the Shahab-3 with a range of 2,000 km (1,250 miles), which analysts say can reach Israel.

European stocks fell sharply and oil firmed on Tuesday on the back of the market talk of an Israeli attack, reflecting nervousness about growing tensions in the Middle East.

Israel bombed an Iraqi reactor in 1981 and an Israeli air raid on Syria last September razed what the United States said was a nascent nuclear reactor built with North Korean help. Syria denied having any such facility.