U.S. says not escalating tension with Iran

By Caren Bohan

WASHINGTON (Reuters) - The United States insisted on Wednesday it was not escalating tensions with Iran by holding naval exercises in the Gulf and backed British efforts to free 15 sailors and Marines captured last week.

The Bush administration appeared to be adopting a cautious tone on the standoff over the British sailors so as not to disrupt Britain's negotiations with Tehran.

"There is no escalation of tensions on our part," White House spokeswoman Dana Perino said. She said President George W. Bush spoke with Prime Minister Tony Blair earlier on Wednesday about Iran, among other things, in a previously scheduled, secure video conference.

"The president fully backs Tony Blair and our allies in Britain," Perino said.

Analysts said the effort to keep the U.S. rhetoric subdued was probably the wisest course for now.

"The best way to deal with this is for the United States to stay out of it and allow the British, who have a long history of relations with Iran, to work it out," said Judith Kipper, foreign policy analyst at the Council on Foreign Relations.

U.S. naval exercises in the Gulf have rattled global financial markets, sending oil prices higher and contributing to declines in stock prices. Markets got a jolt late on Tuesday by a rumour -- which proved unfounded -- of a clash between Iran and the U.S. Navy.

Oil investors are worried that a nuclear dispute between Iran and the West, and Tehran's seizure of the British personnel, could escalate and disrupt oil moving through the Strait of Hormuz, which handles about a third of the world's sea-borne oil shipments.