While stressing that "we cannot be sure" about Iran's possible role, the British leader linked the issue to the diplomatic confrontation between Tehran (search) and Western nations over Iran's nuclear program.
"There is no justification for Iran or any other country interfering in Iraq,me European nations believe Tehran wants to build atomic bombs. The IAEA last month passed a resolution warning Iran it would be referred to the U.N. Security Council, where it could face possible sanctions, unless it allayed fears about the nuclear program.
Speaking at a news conference with Iraqi President Jalal Talabani (search), Blair appeared to back away slightly from accusations against Iran made Wednesday by a senior British official. That official said Britain believes Iran's Revolutionary Guard is supplying explosives technology that has killed eight British soldiers in incidents over the summer.
"We know that the devices are of a similar nature to those used by Hezbollah, and there are certain pieces of information that lead us back to Iran," Blair said. "But I'm not saying any more than that — we cannot be sure of this."
"What is clear is that there have been new explosive devices used, not just against British troops but elsewhere in Iraq," Blair added. He did not say whether the devices were used against Americans.
"The particular nature of those devices lead us either to Iranian elements or to Hezbollah, because they are similar to the devices used by Hezbollah," the Lebanese group backed by both Syria and Iran.
In Beirut, Hezbollah denounced Blair's accusations as "lies."
"Hezbollah denies any connection with the events in southern Iraq, and reaffirms that British accusations of Hezbollah being the source of the explosives targeting the British occupation forces are lies," the group said in a statement.
"Hezbollah believes that the purpose of these British accusations is only to defend the inability of the occupation to face the growing resistance inside Iraq."
Iran's Revolutionary Guards (search) are believed to have provided training, equipment and money to Hezbollah. In Lebanon, Hezbollah focuses on fighting against Israel, but the group also more broadly shares the Revolutionary Guard's anti-U.S. rhetoric and goal of promoting Islamic theocracy.
Tehran is estimated to provide Hezbollah with $10 million-$20 million monthly.
Talabani said he was "very concerned" about the reports but added that further investigation was needed to determine the source of attacks in southern Iraq.
Iran "categorically denied the strange accusation," the official Islamic Republic News Agency reported Thursday.
The agency said the Iranian Embassy in London "stressed that Iran has always maintained a status against aggressive moves in Iraq."
British Foreign Secretary Jack Straw said later that Britain hoped to resolve the issue.
"We look to the Iranian government to sit down with us, hear what we have to say and take action where appropriate," Straw told reporters.
The government of Shiite-majority Iran is extremely supportive of Iraq's Shiite-led government, but many U.S. and Western officials have long believed that rogue elements in Iran, including shadowy groups affiliated with the Revolutionary Guard, could be backing different factions in Iraq's internal power struggles.
Also, some in Iran — which opposes the U.S. and British presence in Iraq — might have an interest in supporting a Sunni-led insurgency attacking American and British troops.
A senior British official first made the accusation against Iran at a Wednesday briefing. The official, briefing reporters on condition of anonymity, said there was evidence Iran was in contact with Sunni Muslim (search) insurgent groups battling coalition troops in Iraq.
Barring hard evidence, many analysts caution that Tehran's direct involvement is impossible to confirm.
U.S. officials also said in the past that they suspect Iran is the source for armor-piercing mine technology used by Hezbollah, which may have passed it to Palestinian militants. But analysts have said munitions used in Iraq are hard to trace, and charges they are supplied by Iran could be politically motivated.
Hezbollah was formed in 1982 with Iranian backing during Israel's invasion of Lebanon. It has been linked to the 1983 bombing of U.S. Marine barracks in Lebanon.