Iran warned Gulf Arab neighbours that they would suffer consequences if they raised oil output to replace Iranian crude facing an international ban.

In signs of Tehran's deepening isolation over its refusal to halt nuclear activity that could yield atomic bombs, China's premier was in Saudi Arabia probing for greater access to its huge oil and gas reserves and Britain voiced confidence a once hesitant European Union would soon ban oil imports from Iran.

Major importers of Iranian oil were long loath to embargo the lifeblood of Iran's economy because of fears this would send oil prices rocketing at a time, amidst debt and deficit crises and high unemployment, when they could least afford it.

But strong momentum for oil sanctions has been created by a UN watchdog report saying Iran appeared to have worked on designing an atom bomb.

A new US law signed by President Barack Obama on New Year's Eve would freeze out of the US financial system any institution dealing with Iran's central bank - which processes its oil revenues.

If fully applied, the law would make it impossible for most countries to buy Iranian oil.

Washington is offering waivers to countries to let them keep buying Iranian oil for now, but demanding they gradually cut their imports back.