Foreign Secretary Jeremy Hunt says Britain will release an Iranian oil tanker - seized by Royal Marines in Gibraltar - as long as the cargo does not break EU sanctions and end up in Syria.
Iran's response has been that they should be allowed to continue oil exports on their own terms.
Anglo-Iranian tension remains high after the shipping attacks in the Gulf and the intervention of HMS Montrose in another incident.
Police in Gibraltar released the crew of the supertanker Grace 1, which was detained on suspicion of breaching EU sanctions against Syria.
The captain, chief officer and two second officers were conditionally bailed without charge.
Their arrests came after a Royal Navy warship drove off Iranian patrol boats as they attempted to impede the progress of a British tanker through the Strait of Hormuz.
That incident followed a warning by Iranian President Hassan Rouhani of unspecified "repercussions" for the seizure of the Grace 1 off Gibraltar on Thursday 4th July.
In London, ministers have urged Tehran to "de-escalate" the situation in the Gulf.
The Royal Gibraltar Police said the investigation related to the arrests is ongoing and the vessel remains in detention.