Tensions mount as Saudi 'bombs' Iran's Yemen embassy

Iran accused Saudi Arabia of hitting its embassy in Yemen on Thursday, as part of Riyadh's ongoing war against rebels in the country.

Tehran said Saudi war planes "deliberately" struck Iran's embassy in Yemen in an air raid that wounded staff, however the Associated Press reported that no damage to the building can be seen.

It comes as tensions between the two regional powers mount, while Saudi's Gulf partners take a common line against Iran.

"This deliberate action by Saudi Arabia is a violation of all international conventions that protect diplomatic missions," foreign ministry spokesman Hossein Jaber Ansari was quoted as saying by state television.

"The Saudi government is responsible for the damage caused and for the situation of members of staff who were injured," Ansari added, without specifying when the alleged strike took place.

"The Islamic republic reserves the right to pursue its interests in this matter."

Saudi Arabia has led a Arab-Gulf military coalition against Iranian-backed Houthi rebels in the Yemen.

The Shia-Zaydi rebel group and their allies took control of most the country - including the capital Sanaa - this year.

Iran and Saudi Arabia are also supporting rival parties in Syria's civil war.

Tensions mounted last week when Saudi Arabia beheaded a leading Shia cleric, and Shia-majority Iran cut diplomatic ties with the Gulf kingdom in response.

Iran also announced on Thursday that it had banned all Saudi products from its markets.

"The cabinet has banned the entry of all Saudi products and products from Saudi Arabia," Tehran said in a statement.

It also announced that Iranians would also be banned from travelling to the Saudi holy city of Mecca for umrah pilgrimage "until further notice".

Saudi Arabia's Foreign Minister Adel al-Jubeir also hit out at Iran on Thursday accusing Tehran of supporting "terrorism", meddling in Arab countries, and igniting sectarianism in the region.

"They have been providing supplies for terrorists; they have been recruiting people; they have been assassinating people; they have been sowing sectarianism in the region, splitting the Islamic world. Their policies are in violation of all the norms and customs that the international community has been based on," Jubeir said.

"Iran should back off, stop being aggressive, stop interfering, stop supporting terrorism."

Iran warned Saudi Arabia not to add "fuel to fire" on Wednesday.

The instability has caused Gulf stock market prices to tumble while low oil prices continue to bite the Saudi economy.