European Union foreign ministers have agreed to ratchet up economic sanctions on Iran by adding 180 new names to a list of targeted companies and individuals, according to EU officials in Brussels.

This move on Thursday comes after ministers were presented responses to a report by the UN nuclear watchdog that said Iran had carried out tests related to "development of a nuclear device".

The UK is also set to announce further sanctions of its own in addition to the latest round of US sanctions aimed at pressuring Iran to drop its nuclear programme.

Britain has responded to the storming its embassy in Tehran earlier this week by downgrading its diplomatic ties with Iran.

William Hague the British Foreign Secretary announced on Wednesday that the UK had shut its embassy in Tehran. Britain also closed the Iranian embassy in London, and gave Iranian diplomats 48 hours to leave the country.

Germany, France and the Netherlands have all recalled their ambassadors to Tehran in solidarity.

The 27-member EU has already frozen the assets of hundreds of Iranian companies and has adopted measures to prevent new investment and technological assistance to Iran's gas producing and refining industry.

France, which has pushed for oil sanctions, appears to have overcome resistance among some EU member states who had expressed concerns over economic costs of an oil embargo.

Experts say global crude prices could rise if the EU bans Iranian oil, which could bring additional economic pain as Europe struggles with a debt crisis and the spectre of recession.

Greece, in particular, had been reticent, because financial woes have led it to buy more Iranian crude. Sources say Tehran has been offering better financing terms at a time when banks are reluctant to extend loans to Athens.

Russia, however has raised concerns over the action the EU have taken against Iran.

"We speak out categorically against cranking up a spiral of tension and confrontation on issues linked with Iran. We believe that this ... is fraught with severe consequences," said the Foreign Ministry spokesman Alexander Lukashevich in a news briefing.

Attackers released

Iran, for its part, has released 11 protesters detained for the embassy assault, the semi-official Fars news agency reported on Thursday.

The men were arrested on Tuesday for storming and ransacking the diplomatic compounds. There was no immediate explanation for their release; under Iranian law, damaging property carries a prison term of up to three years.

Hundreds of students attacked the British embassy in Tehran [EPA]

The attack followed an apparently state-sanctioned rally outside the British embassy.

The rampage went on for hours, with protesters tearing down the British flag, looting documents and torching at least one vehicle.

They replaced the flag with a banner in the name of Imam Hussein, a seventh-century Shia saint. One looter pulled a picture of Queen Elizabeth from the wall.

Iran's foreign ministry termed the incident "unacceptable," though other Iranian officials have praised it. Ali Larijani, the parliament speaker, said the protesters' "wrath resulted from several decades of domination-seeking behavior of Britain".

Analysts said the attack highlighted a rift within Iran's ruling elite over how to deal with increased international pressure.

Norway has already reopened its embassy in Tehran after a 24-hour closure due to security concerns following the attack by protesters on Britain's diplomatic mission there.

Foreign Ministry spokeswoman Hilde Steinfeld says the premises opened as usual Thursday morning, after authorities had made a new evaluation of the security situation.