Iran spurned US President Donald Trump's call for a new nuclear pact and a commander threatened more attacks after both sides appeared to back off from intensified conflict following the US killing of an Iranian general and Tehran's retaliatory missile strikes.
Concern that the Middle East was primed for a wider war eased after Trump gave an address on Wednesday that refrained from ordering more military action. But each side's next move in their protracted shadow war was unclear.
Iran fired missiles on Wednesday at sites in Iraq where US troops were based in retaliation for the killing in a US drone attack of powerful Iranian general Qassem Soleimani in Baghdad on Jan. 3. Tehran's foreign minister said this "concluded" Iran's response to his death.
The actions followed months of tension that has increased steadily since Washington withdrew in 2018 from Iran's nuclear pact with world powers and reimposed sanctions that have driven down Tehran's oil exports and hammered its economy.
Trump told Americans on Wednesday: "The fact that we have this great military and equipment, however, does not mean we have to use it. We do not want to use it".
The Iranian missiles fired on military bases in Iraq had not harmed any US troops, he said.
Iran "appears to be standing down, which is a good thing for all parties concerned," he said.
The US president also said it was time for world powers to replace Tehran's 2015 nuclear accord with a new deal that would allow Iran to "thrive and prosper".
But Trump, who was impeached last month and faces an election this year, said he would impose more stringent sanctions on Iran, without specifying what that would involve.
Iran's UN ambassador Majid Takht Ravanchi said in response that Tehran could not trust any idea of dialogue when Trump was threatening to intensify the "economic terrorism" of sanctions, the official news agency IRNA reported.
Iran's powerful Revolutionary Guards also issued new threats to Washington, with one senior commander, Abdollah Araghi, warning of "harsher revenge soon", following the missile strikes, Iranian media reported.
The new head of Iran's Quds Force, which overseas its foreign military operations, said he would follow the course pursued by his predecessor Soleimani.
"We will continue in this luminous path with power," Brigadier General Esmail Ghaani said.
Soleimani had carved out a sphere of Iranian influence running through Syria, Lebanon, Iraq and Yemen, challenging regional rival Saudi Arabia as well the United States and arch foe Israel.
Soleimani was a national hero in Iran whose funeral drew vast crowds of mourners over several days, but was viewed in the West as a dangerous and ruthless enemy.
The military comments contrasted with Wednesday's remarks by Iranian Foreign Minister Javad Zarif, who said Tehran did not want an escalation.
Analysts have said Iran, despite tough talk from political and military leaders, wanted to avoid a conventional war with superior US forces, although it has allies across the region that they say it has used as proxy forces.
Washington said it had indications Tehran was telling its allies to refrain from new action against US troops.
US Vice President Mike Pence told CBS News the United States was receiving "encouraging intelligence that Iran is sending messages" to its allied militias not to attack US targets.
In neighbouring Iraq, Muslim Shi'ite groups opposed to the US presence there also sought to cool emotions that have been running high for weeks.
Moqtada al-Sadr, an influential Shi'ite cleric opposed to US and Iranian interference in Iraq, said the Iraq crisis was over and called on "Iraqi factions to be deliberate, patient, and not to start military actions".
Kataib Hezbollah, an Iran-backed militia the United States blamed for an attack in Iraq in December that killed a US contractor, said "amidst these conditions, passions must be avoided to achieve the desired results" of expelling US forces.
Washington said Iran launched 16 short-range ballistic missiles in Wednesday's strikes, with at least 11 hitting Iraq's al-Asad air base and one striking a facility in Erbil.
Satellite images of al-Asad base before and after the strikes showed damage, including to aircraft hangers. But analysts said little could be gleaned from the images about the accuracy or effectiveness of Iranian missile technology.
Iranian media said the aerospace force commander of the Revolutionary Guards would deliver details about the missile strikes on Thursday.
US and European government sources said they believed Iran had deliberately sought to avoid US military casualties in its missile strikes to prevent an escalation.