Foreign Secretary William Hague could call for the European Union to ban imports of Iranian oil in resopnse to the attack on the British embassy in Tehran.
EU foreign ministers will meet in Brussels on Thursday, and the latest developments in Iran will be on the agenda.
“I will be advocating an intensification of economic sanctions on Iran, particularly to increase the isolation of the Iranian financial sector,” Mr Hague said.
The move came in retaliation for what the foreign secretary said was the regime-backed storming of the UK compound by protesters, in breach of the Vienna Convention.
Its staff have been evacuated and the embassy closed.
Mr Hague said Tehran should be “ashamed” of the violent protest which saw union flags hauled down, a vehicle torched, and looted documents thrown from windows.
It was conducted by about 200 demonstrators from an organisation “controlled by elements of the Iranian regime”, he told MPs, and had made it “impossible” for the UK to maintain a presence in the country.
Germany, France and the Netherlands recalled their ambassadors for discussions over their own future relations, and Italy indicated that it could follow suit.
The latest escalation of already terse relations between the UK and Iran came after the UK severed all financial ties with Iranian banks in response to mounting fears over the country’s nuclear ambitions.
Iran responded by passing legislation downgrading diplomatic ties with Britain, which was swiftly followed by the internationally condemned attack on the embassy.
The Iranian foreign minister has apologised for the incident.