Iran has posted a video showing its masked troops carrying machine guns, rappelling from a helicopter onto a British-flagged oil tanker and seizing control.
Britain has denounced Iran's seizure of a British-flagged oil tanker in the Gulf as a "hostile act" and rejected Tehran's explanation that it seized the vessel because it had been involved in an accident.
Iran's Revolutionary Guards posted a video online showing speedboats pulling alongside the Stena Impero tanker, its name clearly visible.
Troops wearing ski masks and carrying machine guns rappelled to its deck from a helicopter, the same tactics used by British Royal Marines to seize an Iranian tanker off the coast of Gibraltar two weeks ago.
Friday's action in the global oil trade's most important waterway has been viewed in the West as a major escalation after three months of confrontation that has already taken Iran and the United States to the brink of war.
It follows threats from Tehran to retaliate for Britain's July 4 seizure of the Iranian tanker Grace 1, accused of violating sanctions on Syria.
British Defence Secretary Penny Mordaunt called the incident a "hostile act". Foreign Secretary Jeremy Hunt said he had expressed "extreme disappointment" by phone to his Iranian counterpart, Mohammad Javad Zarif. Britain also summoned the Iranian charge d'affaires in London.
A spokesman for Iran's Revolutionary Guards, Brigadier-General Ramezan Sharif, said Tehran had seized the ship in the Strait of Hormuz despite the "resistance and interference" of a British warship which had been escorting it. No British warship was visible in the video posted by the Guards.
Iran's Fars news agency said the Guards had taken control of the Stena Impero on Friday after it collided with an Iranian fishing boat whose distress call it ignored.
The vessel, carrying no cargo, was taken to the Iranian port of Bandar Abbas. It will remain there with its 23 crew - 18 of them Indians - while the accident is investigated, Iranian news agencies quoted the head of Ports and Maritime Organisation in southern Hormozgan province, Allahmorad Afifipour, as saying.
In a letter to the UN Security Council, Britain said the tanker was approached by Iranian forces when it was in Omani territorial waters exercising its lawful right of passage, and the action "constitutes illegal interference".
"Current tensions are extremely concerning, and our priority is to de-escalate. We do not seek confrontation with Iran," the letter said. "But it is unacceptable and highly escalatory to threaten shipping going about its legitimate business through internationally recognised transit corridors."
Zarif told Hunt that the ship must go through a legal process before it can be released, Iran's ISNA news agency reported.
The strait, between Iran and the Arabian peninsula, is the sole outlet for exports of most Middle Eastern oil, and the seizure sent oil prices sharply higher. The United States, which tightened sanctions against Iran in May with the aim of halting its oil exports altogether, has been warning for months of an Iranian threat to shipping in the strait.