Israel has allegedly bombed an Iran freighter thought by experts to be used as a floating military command center by The Revolutionary Guard off the coast of Djibouti.
The attack happened early Tuesday, Iran officials say.
Israel divers used limpet mines to blow up the "MV Saviz" as it sailed through the Red Sea, the reports said.
Iran official news media said the blast caused minor damage only. No one was injured. Iran's Ministry of Foreign Affairs confirmed the attack.
The "Saviz" was deployed to escort Iran merchant ships in the Red Sea, Iran said. "The vessel was a civilian ship stationed there to secure the region against pirates," foreign ministry spokesman Saeed Khatibzadeh said. Iran "will take all necessary measures through international authorities."
Saudi Arabia has criticized Iran for sending the Saviz to the Red Sea to coordinate Houthi attacks against the kingdom.
The "Saviz" was sanctioned in 2018 by the U.S. for alleged illegal activities and placed on a Treasury Department blacklist.
An unidentified U.S. official told The New York Times that Israel had told the U.S. it carried out the attack. Israel and White House officials refused to comment.
Meanwhile, America's European allies along with Russia and China have met in Vienna with Iran representatives in a bid to revive nuclear talks with Iran.
Officials said initial indirect talks in Vienna Tuesday were "constructive." Negotiations will continue this week as U.S. President Joe Biden looks to revive the nuclear deal. "We do see this as a constructive and certainly welcome step," said U.S. State Department representative Ned Price.
"It is a potentially useful step as we seek to determine what it is that the Iranians are prepared to do to return to compliance with the stringent limitations under the 2015 deal and, as a result, what we might need to do to return to compliance ourselves."