The UN nuclear watchdog has asked Iran to explain evidence that it has experimented with highly advanced nuclear warhead designs, a British newspaper reported Friday.

The International Atomic Energy Agency (IAEA) believes Iranian scientists may have tested components of the sophisticated technology, known as a "two-point implosion" device, the Guardian reported.

This technology -- whose existence is secret in the United States and Britain -- would allow for the production of smaller and simpler warheads and reduce the diameter of a warhead and make it easier to put on a missile, it said.

The Guardian cited previously unpublished documentation in a dossier compiled by the IAEA, drawn in part from reports submitted by western intelligence agencies, and presented to Iran for response.

An unnamed European advisor on nuclear issues told the newspaper: "It is breathtaking that Iran could be working on this sort of material."

Western powers have long feared that Iran is developing nuclear weapons, something it denies.

Iran and western powers are currently engaged in talks over how to procure nuclear fuel for an Iranian research reactor.

Under a UN-brokered proposal Iran would send its low-enriched uranium (LEU) abroad for conversion into fuel for the reactor. Iran says it would rather buy the fuel directly.