The Iranian government is on the brink of breaching the 2015 nuclear pact, as it ratchets up pressure on the US to lift economically damaging sanctions.
Iran has stepped up its defiance of the landmark 2015 nuclear deal reached with the west, saying it will shortly boost its uranium enrichment above the set cap.
President Donald Trump, who withdrew the US from the deal and reimposed sanctions, is now pressuring Tehran to renegotiate the pact, saying "Iran had better be careful".
France, Germany and Britain have also expressed concerns over the latest step taken by Tehran.
Meanwhile, senior Iranian officials threatened further violations, saying Tehran would keep reducing its commitments every 60 days unless European parties to the agreement protected it from US sanctions ravaging its economy.
"We are fully prepared to enrich uranium at any level and with any amount," said Behrouz Kamalvandi, spokesman for Iran's Atomic Energy Organisation.
"In a few hours the technical process will come to an end and the enrichment beyond 3.67 per cent will begin," he added, referring to the limit set in the 2015 agreement.
Speaking to reporters as he departed Morristown, New Jersey, President Trump warned Tehran.
"Iran better be careful. If you enrich for one reason and I won't tell you what that reason is but it's no good. They'd better be careful," he said.
Iran is 'doing a lot of bad things', Trump said but did not elaborate.
"The way they want it, they would have automatic rights to have nuclear weapons. Iran will never have a nuclear weapon," he added.
Iran's main demand - in talks with the European parties to the deal and as a precondition to any talks with the United States - is to be allowed to sell its oil at the levels before Washington pulled out of the agreement and restored sanctions.
The confrontation has taken on a military dimension, with Washington blaming Tehran for attacks on oil tankers, and Iran shooting down a US drone, prompting aborted US air strikes.
The European Union strongly urged Iran to stop actions that would undermine the pact, saying it was in touch with other parties and may set up a joint commission to examine the issue.
Iran has left a door open for negotiations.
All measures taken to scale back its commitments to the agreement were "reversible" if the European members of the pact fulfilled their obligations, Foreign Minister Mohammad Javad Zarif tweeted on Sunday.
Daniel Byman, senior fellow for foreign policy at the Brookings Institution, said Iran was engaged in a tricky balancing act.
"The step is meant to show domestic audiences that Iran is standing up to US pressure. It is also meant to convey a sense of risk to European audiences that Iran may provoke a crisis," he said.
Inspectors from the UN nuclear watchdog who are in Iran will report back once they have checked that Tehran has enriched uranium to a higher level of purity than that allowed under the deal, the agency said.
'Very dangerous step'
Israeli Prime Minister Benjamin Netanyahu called an announcement by his country's arch-foe Iran that it would breach the uranium enrichment cap set by an endangered nuclear deal a "very dangerous step".
"This measure is a very dangerous step, and I call on my friends, leaders of France, Britain, Germany: You signed the deal and said the moment they'd take this measure, harsh sanctions would be imposed," Mr Netanyahu said at the start of a cabinet meeting.
Iran said on Sunday it was set to breach the uranium enrichment cap set by the nuclear deal within hours as it seeks to press signatories into keeping their side of the bargain.
The Islamic republic also threatened to abandon more commitments unless a solution is found with parties to the 2015 agreement.
The move to start enriching uranium above the agreed maximum purification level of 3.67 per cent comes despite opposition from the European Union and the United States.
Mr Netanyahu opposed the nuclear deal and urged US President Donald Trump to withdraw from it, which he eventually did.
Despite having opposed the deal, Mr Netanyahu is now calling on European nations to enforce its parameters as he and the United States seek to further pressure Iran.
Iran leaves the door open to diplomacy
In a news conference, senior Iranian officials said Tehran would keep reducing its commitments every 60 days unless signatories of the pact moved to protect it from US sanctions, but they left the door open to diplomacy.
Before the deal was sealed, Iran produced 20 per cent enriched uranium needed to fuel its Tehran reactor and the level of enrichment for its southern Bushehr nuclear power plant was 5 per cent.
“We will enrich uranium based on our needs ... right now we don’t need to enrich uranium needed for Tehran reactor,” said Behrouz Kamalvandi, Iran’s Atomic Energy Organization spokesman.
“We will enrich uranium to the level that is needed for the Bushehr reactor.”
In a sign of heightening Western concern, French President Emmanuel Macron said he and Iran’s President Hassan Rouhani had agreed to seek conditions for a resumption of dialogue on the Iranian nuclear question by July 15.
Macron’s office added that he would keep on talking with Iranian authorities and other involved parties to “engage in a de-escalation of tensions related to Iranian nuclear issue.”
Long-tense relations between Tehran and Washington took a turn for the worse in May 2018 when US President Donald Trump pulled out of the 2015 nuclear deal reached before he took office, and reimposed sanctions.