An explosion which today rocked the town of Deylam near Iran's controversial nuclear power plant was not the result of a hostile attack, the Iranian Interior Ministry has said.

The Iranian government moved to defuse international tension after state television reported at first that an unknown aircraft had fired a missile into the desert near to Iran's nuclear facility.

Amid a sharp increase in diplomatic jitters, Israel and America swiftly denied any knowledge of a missile, and the price of Brent Crude oil leapt by $1 a barrel on international markets.

A revised report later suggested that the explosion may have been caused by work on a dam.

“It was an explosion set deliberately to blast through rock and open a road,” the Supreme National Security Council spokesman Agha Mohammadi said. “In no circumstances was it an attack against the Islamic republic’s nuclear installations."

Earlier it has been suggested the cause had been a fuel tanker falling from an Iranian airliner, or 'friendly-fire' incident during a military exercise in desert around the town. A spokesman for Iran's Interior Ministry said the explosion was heard minutes after an Iranian aircraft flew over Deylam.

Jahanbakhsh Khanjani said: "We have no reason to say it's a hostile attack. There is a big possibility that it was a friendly fire by mistake. Several such mistaken friendly fire incidents have been reported there in recent days."

An hour earlier, Iran had publicly criticised the United States for sending spy planes to fly over the Russian-designed $800m nuclear facility.

In a further ratcheting up of tension, the Iranian Vice-President had earlier issued a statement saying that his nation was ready to form an alliance with Syria to face growing threats from overseas.

"We are ready to help Syria on all grounds to confront threats," Mohammad Reza Aref said after meeting the Syrian Prime Minister Naji al-Otari.

"Syria and Iran face several challenges and it is necessary to build a common front. We are not the enemies of the United States, and we do not want to be drawn into such an enmity," he added.

Both Iran and Syria have in the past been named by the US President, George Bush, as members of a so-called "axis of evil", state sponsors of terrorism and obstacles to peace in the Middle East.

Syria has been under intense international pressure over its alleged role in the assassination of the former Lebanese prime minister Rafik Hariri on Monday.

Syrian troops have remained in Lebanon since that country's civil war ended 15 years ago, and Damascus has been censured by the United Nations for meddling in Lebanon's internal affairs.

The US has recalled its ambassador to Syria in protest although it has not directly accused Damascus of responsibility. The Syrian government has denied responsibility and condemned the attack.

Reactions to the powerful explosion provided fresh evidence of the high state of tension across the region.

Witnesses claimed on the Arabic language TV channel Al-Alam that a missile had been fired from an unknown plane some 12 miles from the town, 100 km from Iran's new Russian-designed nuclear reactor which is scheduled to open in 2006.

Washington has accused Tehran of starting a covert nuclear weapons programme under the guise of civilian nuclear power plants.

A US Defense Department spokesman stressed to the Reuters news agency: "It is US policy to deal with Iran in a diplomatic manner."

Meanwhile Silvan Shalom, the Israeli Foreign Minister, said during a visit to London that Iran is six months away from having the knowledge to build a nuclear bomb. He said: "The question is not if the Iranians will have a nuclear bomb in 2009, 10 or 11, the main question is when are they going to have the knowledge to do it.

"We believe that in six months from today they will end all the tests and experiments they are doing to have that knowledge."

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