"The first bullet fired by America at Iran will be followed by Iran burning down its vital interests around the globe," the students news agency ISNA quoted Ali Shirazi as saying in a speech to Revolutionary Guards.

The United States and its allies suspect Iran is trying to build nuclear bombs. Tehran says its programme is peaceful.

"The Zionist regime is pressuring White House officials to attack Iran. If they commit such a stupidity, Tel Aviv and U.S. shipping in the Persian Gulf will be Iran's first targets and they will be burned," Shirazi was quoted as saying.

Shirazi, a mid-level cleric, is Supreme Leader Ayatollah Ali Khamenei's representative to the Revolutionary Guards.

"The Iranian nation will never accept bullying. The Iranian nation is a nation of believers which believes in jihad and martyrdom. No army in the world can confront it," he added.

In Jerusalem, Israeli Prime Minister Ehud Olmert's spokesman, Mark Regev, declined to comment on the threat to hit Tel Aviv, saying only: "Shirazi's words speak for themselves."

Israel, believed to be the Middle East's only nuclear-armed power, has vowed to prevent Iran from acquiring an atomic bomb. The United States says it wants to resolve the dispute by diplomacy but has not ruled out military action.

Shirazi's comments intensified a war of words that has raised fears of military confrontation and helped boost world oil prices to record highs in recent weeks.

"We will make the enemy regret threatening Iran," Mohammad Hejazi, deputy commander of the Revolutionary Guards, was quoted as saying by the semi-official Mehr news agency on Tuesday.

Tel Aviv is an Israeli coastal metropolis of about 2 million people. It was hit in 1991 by Scud missiles launched by Iraqi leader Saddam Hussein during a US-led war with Baghdad.

Unlike other major Israeli cities such as Jerusalem and Haifa, it is home to relatively few Arabs.

Iran has previously threatened to close the Strait of Hormuz, the sea channel which flows along its coastline at the entrance to the Gulf, if it comes under attack.

The strait is the world's most important waterway because it is the conduit for roughly 40 percent of globally traded oil.

The Revolutionary Guards' commander of artillery and missile units, Mahmoud Chaharbaghi, said 50 brigades of his forces had been equipped with what he called smart cluster munitions.

"All our arms, bullets and rockets are on alert so that we would defend the Islamic Republic's territory with the most modern arms we have at our disposal," the moderate Hemayat newspaper quoted him as saying.

Senior officials from six world powers held a conference call on Monday to discuss Iran's response to a revised package of incentives to curb its nuclear activities.

The United States, France, Britain, China, Russia and Germany offered Iran the new package last month and said Tehran must suspend its uranium enrichment work before formal talks could start on implementing it.