The UK Ministry of Defence has said that armed Iranian boats tried to "impede" a British supertanker in the Gulf before being warned off by a British warship.
Iran's Revolutionary Guards denied involvement, but warned both the UK and the US that they would "strongly regret" the detention of an Iranian tanker by British Royal Marines off Gibraltar last week.
Police in Gibraltar say they have arrested the captain and chief officer of the vessel and seized documents and electronic devices.
The tanker has been accused of breaking European Union sanctions by transporting oil to Syria.
The UK defence ministry said that three Iranian boats tried to "impede the passage of a commercial vessel, British Heritage, through the Strait of Hormuz".
The 274-metre tanker is owned by British energy giant BP and can carry one million barrels of oil.
"HMS Montrose was forced to position herself between the Iranian vessels and British Heritage and issue verbal warnings to the Iranian vessels, which then turned away," the statement said.
"We are concerned by this action and continue to urge the Iranian authorities to de-escalate the situation in the region," a Downing Street spokesman said.
Iran's Revolutionary Guards - a vast and powerful security organisation the US blames for staging several tanker attacks since May - denied trying to seize or impede the UK tanker.
"There has been no confrontation in the last 24 hours with any foreign vessels," the Revolutionary Guards said in a statement.
UK Foreign Secretary Jeremy Hunt described the clash in the Gulf as "a very concerning development".
"I am very proud of the Royal Navy and the role they played in keeping British assets, British shipping safe," he told the BBC.
"We are continuing to monitor the situation very, very carefully."
UK defence sources told British media that the Revolutionary Guards boats attempted to first stop and then divert the supertanker towards the Iranian shore.
The British warship then trained its guns on the Iranian boats and delivered a "cease and desist" message by radio, the reports said.
The Times newspaper said that the UK is considering whether to send other naval resources to the Gulf.
Sky News reported that the transport ministry has issued new guidance to all British-flagged commercial ships in recent days to go to a heightened state of security in the area.
CNN said that a US surveillance aircraft captured video footage of the episode from above.
Iran has increased uranium enrichment in response to the Trump administration's decision last year to pull out of a controversial nuclear agreement world powers signed after a decade of talks with Tehran.
The UK and other European nations have been trying to preserve the deal by setting up their own independent trade mechanism that evades US sanctions on Iran.