Iran and Israel have engaged in a sharp exchange of words this month over suspicions Tehran is looking to develop nuclear weapons, helping to push global oil prices higher.
"They do not have the capacity to threaten the Islamic Republic of Iran," Iranian Foreign Ministry spokesman Mohammad Ali Hosseini told a news conference.
He was asked about a New York Times report on Friday that quoted U.S. officials as saying Israeli jets conducted a long-range Mediterranean exercise this month that appeared to be a practice for a mission against Iran.
"They (Israel) have a number of domestic crises and they want to extrapolate it to cover others. Sometimes they come up with these empty slogans," Hosseini said in comments translated by Iran's English-language Press TV satellite station.
Iran's defence minister on Sunday accused Israel of "psychological warfare", but said Tehran would give a "devastating" response to any attack.
On Friday, the U.N. nuclear watchdog chief, Mohamed ElBaradei, said a military strike on Iran would turn the Middle East into a fireball and prompt Tehran to launch a crash course to build nuclear weapons.
EU SANCTIONS
Western powers suspect Tehran is seeking to develop nuclear bombs and European Union president Slovenia said the 27-nation bloc was scheduled to agree a new round of sanctions against Iran on Monday over its refusal to stop uranium enrichment.
Israel, widely believed to have the Middle East's only atomic arsenal, has described Iran's nuclear programme as a threat to its existence.
Earlier this month, Israeli Transport Minister Shaul Mofaz told an Israeli newspaper an attack on Iran looked "unavoidable" given the apparent failure of United Nations sanctions to deny Tehran technology with bomb-making potential.
Tehran, which does not recognise Israel and regularly predicts its demise, says its nuclear work is a peaceful drive to generate electricity.
Israel bombed an Iraqi reactor in 1981 and an Israeli air raid on Syria last September razed what the United States said was a nascent nuclear reactor built with North Korean help. Syria denied having any such facility.
But many analysts say Iran's nuclear sites are too numerous, distant and fortified for Israel to take on alone.
Iran has threatened to retaliate if it is attacked. Its Shahab-3 missile, with a range of 2,000 km, is capable of hitting Israel and U.S. bases in the Gulf, Iranian officials say.
