Dubai-based Noor Islamic Bank has been forced by the US to cut off its banking business with Iran as part of wider US efforts to pressure Tehran over its nuclear programme, Reuters said.

A government official in the UAE and a source at the bank said on Wednesday Noor Islamic Bank had halted dealings with Iran, confirming a report in the Wall Street Journal.

Noor Islamic Bank, partly-owned by the emirate of Dubai, appears to be the first financial institution in Dubai to be singled out for doing business with Iran. The UAE central bank stepped up the monitoring of banks' dealings with Iran in the past three months, sources told Reuters earlier this month.

The United Nations and Western countries have imposed a series of economic sanctions on Iran during the past five years over what they say are efforts by Tehran to develop nuclear weapons. Iran denies the charges.

Last June, the US Treasury adopted a law allowing the president to punish foreign banks that carry out financial transactions "for the purchase of petroleum or petroleum products from Iran" provided several conditions are met.

An official at the UAE Ministry for Economic Affairs said only Noor Islamic Bank had been targeted so far. "Of course, as the UAE government, we will comply with the UN resolutions," Khalid Al-Ghaith, the assistant minister for economic affairs, told Reuters at a conference in Abu Dhabi.

He said officials were in contact with the Americans to try to reduce any possible harm to the UAE banking system or companies.

The Wall Street Journal reported, citing people briefed on the operation, that Noor Islamic Bank had become Iran's main conduit for collecting cash from oil sales, handling about 60 percent of them.

As the United Nations and Western countries have imposed increasingly tougher sanctions, the commercial hub of Dubai - 150 km (100 miles) across the Gulf - has seen more business through its financial institutions.

Dubai has long been a major trading partner with Iran, with a sizeable Iranian expatriate population and traditional wooden dhows transporting goods across Gulf waters every day.

"The UAE government took the concerns very seriously and was helpful in resolving" the Noor Islamic Bank case, an official told the Wall Street Journal.

Noor Islamic officials said they could not immediately comment, and were preparing a response. - Reuters