Iran claims that one of the missiles it test-fired this week can reach Israel, according to reports on Iranian state media. The missile was one of nine medium- and long-range rockets that were fired in the latest test of the Islamic Republic’s arsenal of advanced weaponry.

The tests of the new Shihab-3 missiles came at a time of heightened tensions between Iran and Israel. While Iran develops its disputed nuclear program and regularly threatens Israel with annihilation, Israel is said to be weighing the option of a pre-emptive strike on Iran similar to the one made on Iraq’s Osirak reactor in 1981.

Iran has repeatedly denied the charge that it is developing nuclear weapons, claiming that its nuclear program is only for power generation. However, a top Iranian official recently threatened the use of nuclear weapons in retaliation to any attack on Iran.

Iran’s state television network reported that the missiles test, conducted by Iran's elite Revolutionary Guards, included a "new" Shihab-3 missile, which Iranian officials earlier claimed could reach targets 1,250 miles away, including Israel as well as American bases in the area.

An aide to the Ayatollah, Iran's Supreme Leader, said on Tuesday that if Iran was attacked, the Islamic Republic would first hit Tel Aviv, as well as US shipping in the Persian Gulf and US interests around the world.

The comments by the Iranian official escalated tensions by raising fears of military confrontation.  The war of words is also blamed for the record high oil prices of the last few weeks.

At a summit of the Group of Eight (G8) countries in Japan, G8 leaders voiced serious concern at the threats posed by Iran's nuclear program. In a statement following the meeting, the group called on Iran to suspend its program, including all activities related to the enrichment of uranium.

Last month the European Union offered Tehran an incentives package, which they hoped would encourage Iran to voluntarily abandon its nuclear ambitions. French President Nicolas Sarkozy said the G8 countries will be sending European Union foreign policy chief Javier Solana to Iran for further talks on the package, but did not specify a date.

Iran officially acknowledged the offer on Friday, but Iranian President Mahmoud Ahmadinejad rejected the stated condition, namely that Iran suspend uranium enrichment.  Ahmadinejad termed the condition on Monday “illegitimate.”

Despite the Iranian president’s refusal to suspend uranium enrichment, U.S. Secretary of State Condoleezza Rice voiced hope for talks between Iran and the international community that would lead to a suspension of enrichment activity.