Britain's Prime Minister Tony Blair said the way was open for diplomatic efforts to secure the release of 15 British sailors and marines seized by Iran, and the next 48 hours would be critical.
The two countries have been at loggerheads since Iran seized the sailors on 23 March in the northern Gulf, but there have been few tangible signs of progress in the 12-day stand-off.
Ali Larijani, the secretary of Iran's Supreme National Security Council, said he believed bilateral diplomacy could resolve the crisis quickly.
Britain responded by saying it too would like early talks to end the row.
Mr Blair said: 'We're not looking for confrontation over this and actually the most important thing is to get the people back safe and sound. And if they want to resolve this in a diplomatic way the door is open.
'The next 48 hours will be fairly critical.'
Oil prices tumbled more than a dollar after Blair's comments on hopes there may be a diplomatic end to the crisis that has stoked fears crucial oil supplies from the Gulf could be hit.
British moves to get the international community to condemn Iran had angered Tehran while Britain has criticised the parading of its military personnel on Iranian television, saying the broadcasted admissions of guilt had been forced.
Iran said the row could be resolved soon if London continued its 'changed behaviour' and accepted its sailors and marines had entered Iran illegally.
Larijani left the door open for discussion about whether the sailors had strayed into Iranian waters by saying a 'delegation' should be sent to clarify the issue once and for all.
The dispute centres on where the sailors were when they were seized. Britain insists they were in Iraqi waters on a routine UN mission, but Tehran says they were in its territory
