The United States has urged the world to take concerted action against Iran for an alleged plot to assassinate the Saudi ambassador on American soil, calling it a "dangerous escalation."

Tehran has accused the United States of fabricating the charges to distract from domestic economic woes amid growing anti-Wall Street protests, while some experts have voiced doubts that the plot was hatched by Iran's leaders.

Secretary of State Clinton rallied support for tough new measures against Iran, although it was not immediately clear what they might be.

"We call upon other nations to join us in condemning this threat to international peace and security," Clinton urged Wednesday.

This plot was "a flagrant violation of international and US law, and a dangerous escalation of the Iranian government's longstanding use of political violence and sponsorship of terrorism.

"This kind of reckless act undermines international norms and the international system. Iran must be held accountable for its actions."

The US Treasury meanwhile slapped sanctions on Mahan Air, a Tehran-based commercial airline accused of ferrying around the Middle East members of Iran's Islamic Revolutionary Guards Corps implicated in the plot.

The airline's assets in the United States were frozen and US citizens were barred from doing business with the firm.

US President Barack Obama called King Abdullah of Saudi Arabia to reaffirm ties in the wake of what the White House called an "Iranian-directed conspiracy to assassinate the Saudi Arabian Ambassador in Washington, DC."

Iran strongly denied any involvement in what the US says was a plot by the Iranian Revolutionary Guards' elite Quds force to kill the Saudi ambassador by hiring assassins from a Mexican drug cartel for $1.5 million.

Announcing the stunning news on Tuesday, the US authorities named two principal suspects: Manssor Arbabsiar, a used-car salesman who is a naturalized US citizen, and Gholam Shakuri, said to be an Iran-based Quds Force operative.

Shakuri is believed to be in Iran, while Arbabsiar, 56, was arrested on September 29 at New York's John F. Kennedy airport and appeared in court Tuesday in Manhattan. His lawyer said he would plead not guilty, if charged.

The Treasury Department on Tuesday froze the US assets of Shakuri and Arbabsiar, and three others -- Qasem Soleimani, Hamed Abdollahi and Abdul Reza Shahlai -- whom it said were senior Quds Force officers involved in the plot.

The complaint says Arbabsiar -- with the approval of Shakuri -- facilitated the wiring in August of approximately $100,000 into a US bank account as a down-payment for the assassination attempt.

When the undercover US agent posing as the would-be assassin noted that others, including American senators, might be killed if the attack was carried out at a particular restaurant, Arbabsiar allegedly said: "No big deal."

Iran, which faces four rounds of UN sanctions over its nuclear program, has sent a letter of protest to the Security Council accusing Washington of "warmongering."

And in a televised mass rally Wednesday, Iran's supreme leader, Ayatollah Ali Khamenei, predicted that the Occupy Wall Street anti-corporate movement gripping New York would grow to "mark the downfall of the West."

France and Britain agreed to back US demands for further action at the United Nations, but criticism was notably muted from vital veto-wielding Security Council members Russia and China.

Russia's UN ambassador Vitaly Churkin called the case "rather bizarre," while China was yet to comment at all.

The US administration will be sending delegations to Beijing and Moscow to give details of the investigation, diplomats said.

The Sunni-dominated Gulf Cooperation Council (GCC), which groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, said the alleged plot was "severely harmful" to Gulf-Iranian relations.

Jordan also strongly condemned the alleged plot, with Foreign Minister Nasser Judeh in Amman saying Saudi stability and security were "a red line."

A former chief of Saudi intelligence, Prince Turki al-Faisal, said the evidence pointing to Tehran's involvement was "overwhelming" and stated: "Somebody in Iran will have to pay the price."

However, some experts remained skeptical that it involved or had the approval of high-level officials in Tehran.

"It does not look like the ordinary way that Iran would carry out an assassination," said Rasool Nafisi, an Iranian-American scholar who studies the Revolutionary Guards.

"I suspect this is not the work of the Iranian regime, when you look at the choice of target, timing of action and type of actor."

Mexican analysts have said the country's powerful cartels have military-like capabilities but have not proven to be adept at explosives and would be unlikely to court US wrath that could hurt their drug sales in America.