Iran’s embargo on imports from Saudi Arabia will reportedly affect goods worth about $40 million (36.7 million euros).
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Iran also announced that a ban on Iranians travelling to the Saudi holy city of Mecca for the year-round minor pilgrimage, known as the umrah, would remain in place indefinitely.
Tensions between Iran and Saudi Arabia have run high since the Sunni monarchy rang in 2016 with the execution of a prominent Shiite cleric.
Somalia joins Saudi Arabia, Sudan and Bahrain in cutting ties to Iran.
Ahmed Asseri, a Saudi spokesman for the military alliance, promised to investigate the Iranian accusations, but noted there was “no proof yet”.
Iran has accused Saudi Arabia of an aerial attack on its embassy in the Yemeni capital Sanaa.
Iran’s hardline Revolutionary Guards had promised “harsh revenge” against the Saudi royal dynasty for Saturday’s execution of Nimr who is considered a terrorist by Riyadh but hailed in Iran as a champion of the rights of Saudi Arabia’s Shia minority.
However, Saudi defence sources said the airstrikes in Yemen had been happening for a long time but there was no sign of damage to the premises of the embassy.
A Saudi-led coalition has been bombing Houthi tribesmen in Yemen since previous year and Riyadh has accused Iran of supporting them with arms and finances.
“We hope the situation in the Middle East can move in the direction of amelioration”, said Chinese Foreign Ministry spokeswoman Hua Chunying.
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Kuwait recalled its ambassador to Tehran on Tuesday, while the United Arab Emirates has partially downgraded diplomatic relations.
Several Saudi allies have followed the kingdom’s lead and scaled back or cut diplomatic ties to Iran.
“For the past two-and-a-half years, Saudi Arabia has opposed Iran’s diplomacy”, he said at the press conference with Iraqi Foreign Minister Ibrahim al-Jaafari.
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The decision was made in a cabinet meeting chaired by President Hassan Rouhani, it said.
