Iranian state media said the tests were part of war maneuvers in the Gulf, dubbed "The Great Prophet 3" carried out by the naval sector of the Revolutionary Guards, which included firing shore-to-sea, surface-to-surface and sea-to air missiles.

The Iranians also fired the Hoot (Whale) torpedo, which Iran unveiled in April 2006 as a super-fast weapon capable of hitting enemy submarines, saying it has been developed with special technology that only Iran and another unidentified country possesses.

Iranian media boasted that the range of its updated prize Shehab 3 missile it tested can reach 2,000 kilometers; in other words, Israel and U.S. military bases and vessels in the region are within striking distance should Iran be attacked first.

Tehran's show of its military abilities, which continued overnight, is taking place in the strategic Strait of Hormuz at the mouth of the Gulf, in which 40 percent of the world's oil passes, but Iran did not say exactly where the missiles were tested.

Iranian analysts say while the exercises and testing are not new, their timing and place carry political significance, having come amid growing tension after Israel sent war jets to the eastern Mediterranean last month for a huge military exercise that was said to be in preparation for a possible strike on Iran's nuclear facilities.

The U.S. and British forces have also held military games in the Gulf.

Israel and the United States have recently been repeating that resorting to military force remained an option to stop Iran's uranium enrichment process that the West fears could be used to make nuclear weapons, but which Tehran insists it is pursuing for peaceful energy purposes only.

But Iran's assurances are not soothing Israeli fears that Iran, whose leaders have threatened to eliminate the Jewish state, would use future nuclear warheads against Israel, which itself is believed to have hundreds of undeclared warheads. The Jewish state has undergone nationwide drills for mock nuclear attacks.

The air force commander of the Iranian Revolutionary Guards, Gen. Hossein Salami, said on Wednesday that Iran's ongoing war games "demonstrate our resolve and might against enemies who in recent weeks have threatened Iran with harsh language."

"Hundreds and maybe thousands of missiles are ready to be fired at specific targets," Salami warned. "A small part of our defense options was put on display for the world today. Our real reaction against enemy threats will be quicker and stronger. Our hands are always on the trigger and our missiles are ready for launch."

His remarks were preceded by another tough warning by Ali Sherazi, a close aide to supreme leader Ayatollah Khamenei, who said that his country would "set on fire" Israel and the U.S. navy in the Gulf as its first response to an American strike over its nuclear program.

Israel on Thursday responded to the Iranian display of power by parading what it said was a new and highly-advanced spy aircraft.

The Iranian "threats" also drew a warning from U.S. Secretary of State Condoleezza Rice, who vowed to "defend American interests and the interests of our allies," and declared the United States had boosted its security in the Gulf.

She told reporters during a visit to Tbilisi, Georgia, on Thursday: "We take very strongly our obligation to defend our allies and we intend to do that. In the Gulf area, the United States has enhanced its security capacity, its security presence, and we are working closely with all our allies to make sure they are capable of defending themselves."

The military exhibitions and political rhetoric has undoubtedly raised the tension in the turbulent Middle East, where the Arabs evidently feel they are being caught up in the threat of war that should not involve them but could easily suck them in because of their geopolitical position.

However, analysts say that Iran's response – so long as it remains just an exercise and parade – may very well succeed in deterring an attack that could spark what could be the deadliest war the region has ever experienced.

Arab commentators noted that the Iranian military show of its capabilities may have been at least partly responsible for U.S. official statements that downplayed both a military confrontation and Iran's nuclear advancement.

In an ironic contrast to the U.S. top diplomat's tough rhetoric, U.S. Defense Secretary Robert Gates said Wednesday that war with Iran was not close.

"The reality is there is a lot of signaling going on, but everybody recognizes what the consequences of any kind of conflict would be," he said, adding that the U.S. administration was focusing on the diplomatic and economic approach to persuade Iran to abandon its uranium enrichment.

Also on Wednesday, Undersecretary of State William Burns told Congressional hearings on Iran that "while Iran seeks to create the perception of advancement of its nuclear program, real progress has been more modest." He added that Iran had not yet perfected enrichment because of the effect of the U.N. sanctions on the Islamic republic.

Meanwhile, the Rand research organization on Thursday said in a report that Iran would not likely change its nuclear policy by a military strike and recommended a U.S. policy that focuses on "creating conditions for effective relations over the long haul."

The prominent independent group warned that if Iran's facilities were bombed, "public support for any retaliations its government took would likely be widespread…. Attacks on Iran proper would generate a great deal of ill-will and, in our view, would be unlikely to change Iranian policy."