TEHRAN: Iran said Tuesday it had stepped up uranium enrichment beyond limits set under its nuclear deal with world powers, amid heightened tensions with arch-foe the United States and after Iran seized a South Korean tanker in strategic Gulf waters.

The Islamic republic said it was now refining uranium to 20 percent purity -- far above the level permitted under its 2015 agreement, but way below the 90 percent required for an atomic bomb -- in a step Washington labelled "nuclear extortion".

It was the most striking suspension yet of Tehran's commitments under its landmark deal with six nations, which has been fraying ever since US President Donald Trump dramatically withdrew from it in 2018 and reimposed crippling sanctions.

A war of words has flared again in the final weeks of the Trump presidency and at a time when Iran and its allies have marked one year since a US drone strike in Baghdad killed Iran's most revered military commander, Qasem Soleimani.

Commemorations honouring Soleimani -- whom the US blamed for attacks on its interests in Iraq and elsewhere -- saw mourners in Iraq chant anti-US slogans, but passed off without violence.

Washington has meanwhile reversed an order to bring home its Nimitz aircraft carrier from the Gulf, citing "threats" against Trump, after recently also flying B-52 bombers over the region.

Iran's Islamic Revolutionary Guard Corps has warned it is ready to respond to any attack.

The Iranian armed forces Monday also announced a large-scale, two-day drill of domestically made drones, including "combat, surveillance, reconnaissance and electronic warfare".

On Monday, the Guards launched a dramatic action on the high seas, near the strategic Straits of Hormuz, a chokepoint through which a fifth of world oil output passes.

Its speedboats seized the South Korean-flagged Hankuk Chemi carrying oil chemical products and its multinational crew of 20, accusing it of having polluted sea waters.

South Korea has demanded the ship's release and deployed a destroyer carrying its anti-piracy unit to the Gulf waters.

South Korea will send a government delegation to Iran "at the earliest possible date" to negotiate the release of the vessel and its crew, Seoul's foreign ministry said Tuesday.

Iran's move came days after Tehran had urged Seoul to release billions of dollars of Iranian assets frozen in South Korea as part of the US sanctions.

South Korea's vice foreign minister Choi Jong-kun will go ahead with a planned three-day trip to Tehran early next week, the ministry spokesman said.

Also on Monday, Iran first announced it had stepped up the uranium enrichment process at its underground Fordo site, in a move UN nuclear watchdog the IAEA confirmed.

President Hassan Rouhani had ordered the move in line with a law passed by the conservative-dominated parliament, said a government spokesman.

The legislature voted for the step after the November killing on the outskirts of Tehran of the country's top nuclear physicist Mohsen Fakhrizadeh, an assassination Iran blamed on Israel.

Israeli Prime Minister Benjamin Netanyahu on Monday charged Iran's latest nuclear move proved the clerical state is seeking to build an atomic bomb -- a claim Iran has always strongly denied.

"Israel will not allow Iran to manufacture nuclear weapons," Netanyahu warned.

The US State Department labelled the stepped-up enrichment "a clear attempt to increase its campaign of nuclear extortion, an attempt that will continue to fail".

Trump's son-in-law and adviser Jared Kushner was in Saudi Arabia on Tuesday for a Gulf regional summit, amid a broader US diplomatic strategy to build a regional united front against Iran.

The Rouhani government has signalled it is ready to engage with US President-elect Joe Biden, who has also expressed a willingness to return to diplomacy with Tehran.

Biden, who takes office on January 20, was vice president to Barack Obama, whose administration had finalised the 2015 nuclear deal and hailed it as a landmark achievement.

Iran's Foreign Minister Mohammad Javad Zarif said Tehran took the latest enrichment step "after years of non-compliance" by other parties and that "our measures are fully reversible upon full compliance by all".