Iran will push ahead with plans to test long-range missiles in the Persian Gulf, following a row with the United States over the Strait of Hormuz.
The strait is a vital shipping lane for 40 percent of the world's crude oil, which Iran has threatened to block if an oil embargo is imposed on it over its nuclear programme.
"The Iranian navy will test several of its long-range missiles in the Persian Gulf," Rear Admiral Seyyed Mahmoud Moussavi, deputy commander of the Iranian Navy, told the country's Fars news agency.
The missiles will be fired in the final stage of the military drill, which is intended to "prepare the navy for confronting the enemy" in the event of war.
The row with the United States erupted when Iranian vice-president Mohammed Reza Rahimi threatened to close the strait if Western countries imposed sanctions.
A blockade could lead to a global shortage of oil supplies.
The US Navy reacted angrily, saying it would not accept any Iranian interruption of the flow of goods. General Hossein Salami, deputy head of the Revolutionary Guard, argued that the US was in no position to tell Iran what to do.
He called the US "an iceberg which is to be melted by the high degree of the Iranian revolution" and "a sparrow in the body of a dinosaur".
A Saudi oil ministry official said Gulf oil producers would be ready to step in to make up for any losses.