Iran has accused Saudi warplanes of damaging its embassy in Yemen's capital, Sanaa, and injuring staff in an air strike.
The Saudi-led coalition fighting Shi'ite rebels in Yemen rejected the claim.
Iranian Deputy Foreign Minister Hossein Amir Abdollahian said on January 7 that a rocket struck "near the Iranian Embassy" in Sanaa during an air raid by Saudi Arabia, seriously wounding one guard.
Abdollahian said Tehran will provide the United Nations with a detailed report of the incident.
Earlier, an Iranian Foreign Ministry spokesman described the incident as a "deliberate attack from Saudi Arabia."
The Saudi-led coalition, which has been targeting Iran-backed Shi'ite rebels in Yemen since March, denied Iran's allegations, saying “no operations were carried out around the embassy or near to it."
It said its investigation also confirmed that "the embassy building is safe and has not been damaged."
The New York Times quoted witnesses as saying that a home across the street from the embassy was hit and that embassy guards were wounded by shrapnel. Other reports said there was no damage to the main embassy building.
Earlier, coalition spokesman Ahmed Asseri said its jets carried out heavy strikes in Sanaa in the night on January 6 to target missile launchers used by Huthi rebels to fire at Saudi Arabia.
He also said the rebels have used civilian facilities, including abandoned embassies.
The claim comes as tensions mount between the two regional rivals -- Sunni Muslim power Saudi Arabia and Shi'ite-led Iran -- over Riyadh's execution of prominent Shi'ite cleric Nimr al-Nimr, which was followed by attacks on Saudi diplomatic missions in Iran.
Amid the escalating tensions, Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman told The Economist that his country would not allow a direct war between the two countries.
When asked about the possibility of war, he said: "It is something that we do not foresee at all, and whoever is pushing towards that is somebody who is not in their right mind. Because a war between Saudi Arabia and Iran is the beginning of a major catastrophe in the region."
Meanwhile, a senior commander with Iran’s powerful Islamic Revolutionary Guards Corps warned Saudi Arabia that “it would face collapse and downfall in the next few years” if it did not change course.
Saudi Arabia’s current policies are like a "political avalanche that will bury the Saudi regime," Brigadier General Hossein Salami was quoted as saying at a January 7 ceremony against al-Nimr’s execution.
Also on January 7, Tehran announced it has banned all products from Saudi Arabia.
"The cabinet has banned the entry of all Saudi products and products from Saudi Arabia," the Iranian government said in a statement, noting that a ban on Iranians traveling to the Saudi holy city of Mecca for the umrah pilgrimage was also in place "until further notice."
Iran's annual imports from Saudi Arabia total about $60 million a year and consist mostly of packing materials and textiles.
Saudi Arabia cut ties with Iran after its embassy in Tehran was attacked by protesters.
On January 7, Somalia joined a number of Saudi Arabia’s allies, including Bahrain and Sudan, that have either severed or downgraded their ties with Iran.
The Somali Foreign Ministry said it recalled its acting ambassador to Tehran and ordered Iranian diplomats to leave Somalia within 72 hours.
With reporting by AFP, Reuters, AP, IRNA, Fars, The New York Times, and The Economist