Iran's Oil Ministry denied Tehran's state media reports that the Islamic Republic is stopping its crude exports to six European countries on Wednesday.
"We deny this report ... If such a decision is made, it will be announced by Iran's Supreme National Security Council," a spokesman for the ministry told reporters.
Iran's English language Press TV had earlier said Tehran has stopped exporting oil to France, Portugal, Italy, Greece, Netherlands and Spain.
The move immediately sparked a one percent rise in the price of crude oil on world markets, sending a cost of barrel of crude to more than $101.
Iran has insisted the Western sanctions will backfire because it can make up for the lost sales by exporting to other countries.
It also has warned that higher oil prices could wreak havoc with the fragile Western economies, where some countries in Europe already are in a recession.
But analysts say Tehran is in no position to cut exports to Europe and that the rapid denunciation of the Press TV report proves Iran's oil officials know it.
In recent weeks, the Iranian rial has plummeted, forcing Iranian authorities to threaten speculators in a desperate bid to stabilize the devaluating currency.
As a result, Iran recently defaulted on payments to India for shipments of rice, a commodity it previously purchased without difficulty. Iran’s imports of goods such as palm oil, tea and wheat are all experiencing similar disruptions.
In response, the Iranian regime has increasingly turned toward barter, offering commodities such as gold and oil in lieu of payment for its foreign debts. But that is not a universal salve and some providers will only settle for cash.
The problems have gotten so severe that Iran’s firebrand president, Mahmoud Ahmadinejad, has been summoned before the country’s parliament in recent days to account for his government’s economic mismanagement.
Additionally, a bombing in Delhi targeting Israeli diplomats has tested India's determination to ignore western sanctions on the Islamic Republic and continue buying oil from Tehran.
With over USD 10 billion in trade with Iran on the line senior Indian officials are playing it safe. and have yet to blame Tehran for the bombing.
But according to reports in India's press intelligence officials in Delhi suspect that Iran used local terrorists carry out Monday's attack.
Officials in Delhi, who purchase 12 percent of Iran's exportable oil, say there will be "consequences" for Tehran if they are found culpable for the attack.
Amid the Delhi fallout, Saudi Arabia - India's largest oil provider and the only nation with capacity to make up a serious oil shortfall - offered to replace Iran's oil exports.
India's defense minister was reported to be in Riyadh on Tuesday for a round of meetings with his Saudi counterpart. Oil was said to be on their agenda.