An Israeli firm accused of trading with Iran in violation of sanctions denied the allegations on Tuesday and said they were a "mistake" by the US State Department, Israeli media reported.

Online news site Ynet published a letter it said was from the Ofer Brothers Group, which has found itself at the centre of a scandal over claims it participated in the sale of a tanker to an Iranian firm.

The State Department last week said it was blacklisting the Tel Aviv-based company and its Singapore-based subsidiary Tanker Pacific over the September 2010 sale of the tanker "Raffles Park" to an Iranian firm under sanctions.

But the letter published by Ynet, purportedly from Ofer Brothers to the Knesset's Economic Affairs Committee, denies that their group had any ties to Tanker Pacific.

The company "does not have any form of business relationship with Tanker Pacific," Ynet quoted the letter as saying.

"Our company's name was accidentally inserted into the selling of the Raffles Park ship," it added. "We are working with US authorities to remedy this unfortunate mistake by the State Department and lift the sanctions imposed on us."

The Economic Affairs Committee met on Tuesday afternoon for an emergency session to discuss the case, which has caused an outcry in Israel.

The Jewish state has been one of the loudest proponents of sanctions against Iran in response to its nuclear programme, which Israel and much of the community believe masks a weapons drive, despite Tehran's denials.

But the committee's meeting screeched to a dramatic halt shortly after it began, when committee chairman Carmel Shama said he had received "new information" obliging him to suspend the proceedings until further notice.

"I have to state that in accordance with a message I just received, a request, I have to close the meeting immediately," Sharma said. "The meeting will be convened, if it is convened, at another time."

"I read a note that reached me," he added. "I cannot reveal its contents but it's something which was being clarified during the day."

He did not elaborate, other than to say that the note was not from any "political or business source."