After years of pushing for tough sanctions against Iran, Israel has been left reeling by reports that an Israeli shipping company has been actively doing business with the Islamic republic.

The scandal erupted last week, when the US State Department announced it was sanctioning Israel's Ofer Brothers Group and its Singapore-based subsidiary Tanker Pacific.

The announcement caused a media storm in Israel, which has been a key proponent of tough international sanctions against Iran aimed at reining in its nuclear programme.

Israel and much of the international community suspect the programme is a cover for a drive for a nuclear weapons capability, something Iran strongly denies.

In a statement released on May 24, the US State Department said it was imposing sanctions on Ofer Brothers, Tanker Pacific and a third firm, Associated Shipbroking of Monaco, over the September 2010 sale of a tanker.

The $8.65 million tanker was sold to Islamic Republic of Iran Shipping Lines (IRISL), an entity designated by the United States and the European Union as supporting Iranian "proliferation activities."

The State Department said Ofer and Tanker Pacific "failed to exercise due diligence and did not heed publicly available and easily obtainable information" that would have shown they were dealing with IRISL.

Ofer Brothers has roundly denied selling the tanker, claiming the sanctions arose from a "misunderstanding."

"We never sold ships to Iran, and the state of Israel's official and authorised bodies will confirm our statement," the firm told the Israeli daily Haaretz.

The president of Iran's chamber of commerce Mohammad Nahavandian has also denied any Iranian purchases tied to an Israeli firm.

But investigations by Israeli media showed that seven boats belonging to Ofer docked in Iranian ports on 13 separate occasions over the past decade.

Citing documents from Equasis, a maritime transport database, media said Ofer-linked fuel tankers docked in two Iranian ports, Bandar Abbas and Kharg island.

Sources close to Ofer told Israeli media that the company had authorisation from the Israeli prime minister's office for its tankers to dock at the ports.

But a spokesman for Prime Minister Benjamin Netanyahu denied that claim, saying "no authorisation of that sort has been given."

Writing in Haaretz, journalist Yossi Melman alluded to suggestions that Ofer would justify docking its boats in Iran by claiming it was undertaking "intelligence missions."

Speaking on Israeli army radio, right-wing minister Arye Eldad said there were serious questions about the motives of the firm.

"Israelis have the right to know if the Ofer brothers are heroes or bastards, whether they acted for their personal profits or the presence of the tankers enabled listening and the taking of photos," he said.

Mohsen Sadeqifar, an official with Iran's Port and Maritime Organisation, denied Israeli ships had docked at Iranian ports.

"In recent years no ship belonging to the Zionist regime has docked in Iranian ports, and if there is any claim in this regard, it is contrary to the reality," he was quoted as saying by Iranian media.

The Israeli parliament has ordered an emergency meeting of its economic committee on Tuesday to discuss the case, and the chairman of the committee said it would immediately investigate the alleged transaction.

"It is inconceivable that Israeli companies would have commercial ties with Iran, our number one enemy, while we campaign to convince the international community to impose very strong sanctions and force Tehran to renounce its nuclear programme," Carmel Shama-Cohen told Israeli radio.

The case has raised questions about Israeli compliance with sanctions on Iran, with Ometz, a local group that lobbies for better governance, saying Ofer is "far from" the only Israeli firm doing business with Iran.