Iran began 10 days of wargames around the Strait of Hormuz, a vital route in the Gulf through which more than a third of the world's ship-borne oil passes.
The Velayat-90 military exercises, announced Thursday by navy chief Admiral Habibollah Sayari, kicked off on Saturday as planned, Iran's Arabic-language broadcaster Al-Alam reported.
Iranian navy forces were being deployed throughout the wargame area to the east of the Strait of Hormuz, comprising the Gulf of Oman around to the Gulf of Aden, in the first phase of the exercises, Al-Alam said, citing navy command.
The exercises were taking place at a time of heightened tensions between Iran and the West, with sanctions being ramped up over Tehran's nuclear programme.
The United States, which maintains its own navy presence in the Gulf, has noted Iran's drill.
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Tehran in September rejected a Washington call for a military hotline between the capitals to defuse any "miscalculations" that could occur in the Gulf.
The wargames were ordered as the United States and its allies ratchet up economic sanctions on Iran, targeting its oil and financial sectors. More measures were expected to be imposed in coming weeks.
The sanctions have helped fuel a depreciation of Iran's currency, the rial.
A rumour that spread last Tuesday from an Iranian lawmaker's comments that Tehran was to block the Strait of Hormuz in the drill sent the rial to a new low and oil prices soaring before it was denied by the government.
But while the foreign ministry said last week such drastic action was "not on the agenda," it reiterated Iran's threat of "reactions" if the current tensions with the West spilled over into open confrontation.
Most Western countries believe Iran is seeking nuclear weapons, despite Tehran's denials.
Iran-US tensions have also worsened over US accusations of a thwarted Iranian plot to kill the Saudi ambassador to Washington, Iran's capture this month of a CIA drone, and Tehran's arrest and detention of an American-Iranian it alleges is a CIA spy.