An Iranian official said on Sunday Tehran was discussing internally the idea of switching to dirhams from euros as a possible way to deal with tougher EU sanctions that could block Iranian transactions in the single European currency.

"Is this a joke? We have no time to entertain jokes," Sultan Nasser Al-Suweidi said in a response sent to Reuters by e-mail by his office following a request for comment on the reports.

Analysts say the United Arab Emirates, a US ally and major oil exporter whose ties with Iran are already strained, would likely resist such a change given its wish to avoid being sucked deeper into the dispute over Iran's nuclear ambitions.

Diplomatic relations between the UAE and Iran, which have strong trade links, are growing increasingly fraught.

The dollar is the standard currency for oil trade, but Iran had shifted to the euro for European deals in response to many years of US sanctions against the Islamic Republic.