Saudi Arabia as issued a menacing warning to Iran that it will have to pay a price for the alleged plot to hire a Mexican drug cartel to assassinate its ambassador in Washington.
The threat from the Saudis came as the Obama administration described the alleged plot as a "dangerous escalation" in the region.
White House spokesman Jay Carney said "clearly the plotting happened at senior levels of the Quds force [Iranian special forces]" but the administration resisted calls from within the US, mainly from the conservative right, to retaliate against Iran with military action.
On Wednesday night Carney said Barack Obama spoke to King Abdullah, the Saudi king, about the alleged plot and both agreed it was "a flagrant violation of international law".
Iran denied it was behind the alleged plot, with officials accusing Washington of fabricating the story to divide Sunni Muslims, the dominant group in Saudi, and Shia Muslims, the dominant group in Iran.
They claimed Barack Obama was using the story to divert attention from the Occupy Wall Street protests.
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