Iran test-fired a new missile that can hit radar-evading missiles during a naval drill in the Strait of Hormuz on Sunday. It also announced the successful test of locally-made nuclear fuel rods for powering nuclear reactors.

The tests on the new missiles and nuclear fuel rods that uses uranium mined in Iran came a day after U.S. President Barack Obama signed into law a $662 billion defense bill that also imposes sanctions on Iran by penalising foreign central and commercial banks that transact with Iran's central and local banks relative to the export of Iranian oil.

Iranian navy spokesman Commodore Mahmoud Mousavi told the state media that it was the first time an anti-radar medium-range missile was successfully fired during a naval exercise. The missile called Mehrab was designed and built in Iran, he said.

The naval drill also saw Iranian warships practising a formation for closing the Strait of Hormuz, a narrow channel between the Persian Gulf and the Gulf of Oman used by a third of the world's oil tankers. Iran's military officials had warned that additional international sanctions aimed at preventing the country from exporting its oil will prompt it to close the vital sea lane.

Meanwhile, the Iranian Atomic Energy Organisation said the home-made nuclear fuel rods were inserted into the core of Tehran's research nuclear reactor. The reactor, which produces isotopes for medical purposes, is currently fueled by nuclear plates bought from Argentina in 1993. Iran also has another nuclear reactor built by Russia that runs on Russian fuel rods. With its own nuclear fuel rods, Iran could skirt international sanctions that prevent it from purchasing nuclear materials in other countries for use in its nuclear development programme.

Western governments view Iran's nuclear development programme as a front for developing nuclear weapons, which Tehran denies. The U.S. government, through the United Nations Security Council, has imposed economic sanctions on Iran meant to restrict such activities and pressure Tehran into stopping its nuclear programme.