DUBAI (BLOOMBERG) - Iran's supreme leader scorned the idea of negotiations to ease his country's tense stand-off with the US in his first comments since being sanctioned by Mr Donald Trump.

"If we agree in negotiations to their demands, they will make the nation miserable," Ayatollah Ali Khamenei said on Wednesday (June 26), arguing Washington was attempting to strip Iran of its economic and defence capabilities.

"And if we don't, they will go on creating political frenzy, fuelling propaganda and applying pressure."

He spoke after Iranian officials said the wreckage of a US drone shot down last week was found 6km inside its territorial waters, in one of Iran's most detailed accounts of an incident that brought the Middle East to the brink of war.

"After the shooting down of the drone, initial actions were taken and its location was identified," Brigadier-General Majid Fakhri, the head of the Iranian Armed Forces' Geographical Organisation, was cited as saying by the semi-official Tasnim news agency.

President Trump abruptly cancelled planned airstrikes against Iran for downing the drone, which US officials say was flying through international airspace as the region risked a devastating new conflict. But tensions have continued to escalate with the two governments trading threats and insults.

SHIP ATTACKS

Mr Trump on Tuesday vowed to meet any Iranian strike on the US with overwhelming force, while Iran said the path to a diplomatic solution to the crisis had closed after its top leader, Ayatollah Khamenei, and other top officials were sanctioned. It also characterised the White House as suffering from a "mental disorder".

Tensions have spiked in the Gulf since May, when the Trump administration revoked waivers on the import of Iranian oil, squeezing its economy a year after the US walked away from the landmark 2015 deal meant to prevent the Islamic Republic from developing a nuclear weapon.

Since then, a spate of attacks on oil tankers near the Strait of Hormuz, a shipping chokepoint, have convulsed the region and pushed up oil prices. Iran denies involvement in the attacks on shipping.

The new penalties are unlikely to have a significant impact on a country that is already in recession due to stringent US sanctions on its oil sector and has been largely shut out of the global financial system.

The US has sanctioned more than 80 per cent of Iran's economy, according to Secretary of State Michael Pompeo, who was in Saudi Arabia and the United Arab Emirates this week to rally a front against Iran.

Still, the targeting of Ayatollah Khamenei shocked some Iranians because he is considered a spiritual guide and a holy man by his most devoted followers.

Mr Trump has coupled his "maximum pressure" campaign of sanctions with invitations to sit down with Iranian leaders. In an interview that aired on Sunday on NBC's Meet The Press, the President said that he thinks Iranian leaders want to negotiate and he is willing to talk with no preconditions except that the outcome must be Iran acquiring no nuclear weapons.

The 2015 nuclear deal was designed to thwart any Iranian attempt to develop an atomic bomb, and international inspectors had repeatedly reported Iran complying with the terms of the accord.

European powers are now attempting to convince Iran to continue abiding by the deal after Iranian officials warned the country would breach the deal's cap on stockpiles of low-grade uranium by June 27.

The UK ambassador to Teheran, Mr Rob Macaire, said on Wednesday that extensive work was under way to boost a special mechanism designed to protect European trade with Iran from US sanctions and ease the economic pressure on Iranians.

"The UK is seriously concerned about Iran's plans to reduce compliance under the JCPOA and firmly believes that it will be in no one's interests," he said in a statement. "We are committed to diplomacy to resolve differences between nations and to reduce dangerous regional tensions."

Russia, with deep political and economic ties to Iran, has denounced US efforts to raise pressure on Iran and this week backed Teheran's account of the downing of the US drone. Foreign Minister Sergei Lavrov said Moscow was still calling for dialogue to resolve the crisis.

"We will continue trying to convince our Iranian colleagues, our American colleagues, that they have step back from the brink and start to resolve their disagreement through civilised dialogue," Mr Lavrov said in Moscow after talks with his UAE. counterpart Abdullah bin Zayed Al Nahyan.

"This means an end to the policy of ultimatums, sanctions and blackmail."

But a top Russian Foreign Ministry official said hopes for a diplomatic solution to the crisis were fading after the penalties imposed on Ayatollah Khamenei.

"There is a very narrow window left because this is an absolutely insulting step for intergovernmental relations. But hope dies last," special envoy Zamir Kabulov told reporters.

"Iran will never be alone if, God forbid, the US ever takes absolutely crazy and irresponsible actions against it," he said. "Not only Russia, but many countries sympathise with Iran."