Iran “successfully” test-fired a 300-kilometer (185-mile) range missile on Saturday, showing its ability to strike targets in the Strait of Hormuz as well as as energy facilities in Saudi Arabia and the U.S. fifth fleet in Bahrain.
Such moves would risk a military response from the United States.
The launch of the current Fateh-110 missile has come two years after its previous model and can “target spots without any diversion,” the official Islamic Republic News Agency (IRNA) reported.
"Using new guidance methods, target-striking systems were installed on the missiles and during the flight test ... its ability to hit the target without deviation was proven," Defense Minister Brig. Gen. Ahmad Vahidi told IRNA.
"In future programs, all future missiles built by the Defense Ministry will be equipped with this capability," he added.
The U.S. Pentagon noted last month in a report that Iran is working on a missile that can reach the American Eastern Seaboard within the next three years.
"Iran has boosted the lethality and effectiveness of existing systems with accuracy improvements and new submunition payloads,” according to the report signed by Defense Secretary Leon Panetta.
Other Iranian missiles in development are to be aimed at Israel and eastern Europe, and include the medium-range Ashoura ballistic missile –with a range of more than 2,000 kilometers (1,250 miles) -- and the long-range Shabab-3.
For these reasons, NATO has been working on installing anti-missile shields in eastern Europe, Turkey and in other areas.
Israel, however, has not taken the military option off the table, and has made it clear that Jerusalem will not tolerate an existential threat to the nation from Iran. Last week Iranian President Mahmoud Ahmadinejad once again reiterated his oft-repeated vow to annihilate the Jewish State.
Also last week, Panetta met with top Israeli officials during a whirlwind visit to the region, and was told that a strike on Iran's nuclear sites is still possible if the Islamic Republic cannot prove it is not developing atomic weapons, which it denies.
Iran has vowed to hit Israel and U.S. bases in the region if it comes under attack. It has also threatened to block the Strait of Hormuz, through which 40 percent of the world's oil exports are shipped.