Tehran, Feb. 16 (Reuters): Iranian state television sent ripples through world financial markets today after it reported a powerful explosion near the town of Dailam, about 160 km from the oil state's only nuclear power plant.
The Al-Alam satellite channel, which broadcasts in Arabic, quoted witnesses as saying the explosion may have been caused by an aircraft firing a missile in a deserted area near Dailam or by a fuel tank falling from a plane.
The Al-Alam report drew a mixed response from Iranian officials. Iran's Revolutionary Guards said the report was wrong, although they declined to give any further details or confirm whether there had been an explosion.
Iran's ISNA students news agency said the explosion was caused by dam construction. 'The explosion that occurred in the Dailam region was that of dam building operations,' Ali Agha Mohammadi, a member of the Supreme National Security Council, told ISNA.
This was later confirmed by a senior military officer. 'What happened was only a natural part of building work. These were heavy blasts carried out for the construction of the dam,' said Ali Reza Afshar, deputy to the chief of staff of the armed forces.
Earlier, Iran's deputy interior minister said there had been reports of a bang in the area but search teams had found no sign of any explosion. 'Up to now, we have found no signs of any explosion,' Ali Asghar Ahmadi said.
The report caused the US stock market to drop briefly and sent oil prices higher, underscoring world jitters over Iran's nuclear programme, which Washington says conceals an effort to build an atomic bomb. '
This explosion basically sent chills down the spines of futures traders,' said Phil Flynn, senior market analyst at Alaron Trading Corp in Chicago.
Israel's foreign minister Silvan Shalom said today the Islamic Republic was six months away from having the knowledge it needed to produce an atomic bomb.
Israel has hinted in the past at possible military action to stop Iran acquiring the bomb. But senior Israeli security officials quickly denied any military involvement in today's incident.
An Israeli air strike on the Iraqi reactor Osiraq in 1981 dealt a severe blow to Saddam Hussein's nuclear programme.
The early Al-Alam report said: 'A powerful explosion was heard this morning on the outskirts of Dailam port, north of Bushehr province in southern Iran. Witnesses said the explosion was caused by a missile fired from an unknown plane 150 km from the city of Bushehr, where Iran's nuclear reactor is located.'
Al-Alam later dropped any reference to a missile strike from its news bulletins.