By David Morgan

WASHINGTON, July 15 (Reuters) - The Pentagon said on Tuesday that Iran has the ability to launch a ballistic missile capable of hitting sections of eastern and southern Europe.

Air Force Lt. Gen. Trey Obering, director of the Missile Defense Agency, told reporters he believes Iran now has a missile with a range of 1,250 miles (2,000 km), but he declined to say whether the weapon has been test-fired.

Iran said last week it conducted two missile tests involving a number of weapons including what Iranian state television called a "new" Shahab-3 missile, a medium-range missile that could be used to strike Israel.

Tensions over Iran's missile arsenal and accusations from the United States and its allies that Tehran is pursuing nuclear weapons have roiled international financial markets with fears of a possible military confrontation.

Iran denies it wants nuclear weapons and says its nuclear program is designed to produce electricity to increase its output of oil and natural gas.

Older versions of the Shahab-3 have a 800-mile (1,300-km) range. But a new extended version is believed to have a range of up to 1,250 miles, making it capable of hitting targets as far away as Greece, Serbia, Romania and Belarus.

Iran is also developing a solid-fuel missile known as the Ashura with a range of 1,250 miles, according to the Pentagon.

U.S. officials and independent missile experts have said last week's tests involved no new or enhanced technology, or even the latest generations of missiles known to be in Iran's arsenal.

Obering did not dispute those assertions in a briefing for Pentagon officials on Tuesday.

But his description of Iran's missile capability was stronger than what U.S. officials have said up to now.

"The Iranians themselves are describing ... a 2,000-km range missile launch," Obering said of last week's tests, adding that Iran also claimed to have such a missile in November.

"I believe, based on what I have seen, that they have the ability to do that and to continue to advance in the future, based on what I have seen so far from those (Iranian state media) reports and from the intelligence reports," he added.

"I won't go into detail as to what was fired when. That's something I think the intel community should answer," he said.

The Pentagon's Defense Intelligence Agency, which monitors major weapons threats to the United States and its allies, was more vague in its Feb. 27 testimony to the Senate Armed Services Committee.

"Iran continues to develop and acquire ballistic missiles that can hit Israel and central Europe, including Iranian claims of an extended-range variant of the Shahab-3 and a new 2,000-km medium range ballistic missile called the Ashura," DIA director Army Lt. Gen. Michael Maples told the panel.

U.S. officials and analysts dismissed last week's missile tests as an angry Iranian response to recent military exercises including an Israeli air exercise in June that some have called a rehearsal for an attack on Iran.

The Bush administration has used concern about Iranian missiles to press forward with plans for a missile defense shield in Poland and the Czech Republic, capable of protecting both Europe and the United States from attack.

Washington and the Czech Republic signed an agreement last week to place missile-tracking radar on Czech soil. U.S. officials are now hoping for a deal to station the system's interceptor missiles in Poland.

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