Foreign Secretary Jeremy Hunt has said the Iranian tanker detained by Royal Marines near Gibraltar could be released, if the UK is guaranteed the oil is not bound for Syria.
The tanker, seized on 4 July, was suspected of breaking EU sanctions.
Iran claimed the seizure was “piracy”. Iranian ships later tried to impede a British tanker, the UK claimed.
After “constructive” talks with Tehran, Mr Hunt said he was encouraged Iran has no desire to escalate the situation.
He said he reassured Iranian Foreign Minister Mohammad Javad Zarif that “our concern has always been destination, not origin of the oil” and that the UK would facilitate release “if we received sufficient guarantees that it would not be going to Syria”.
He added that Mr Zarif wants to resolve the issue and was “not seeking to escalate”.
However, the Iranian foreign minister insisted his country would continue its oil exports under any conditions.
In a statement issued after the phone conversation with Mr Hunt, Mr Zarif said the destination of the oil tanker was a legal one in the eastern Mediterranean, adding that Britain should quickly release the vessel.