Gibraltar's government has insisted a Spanish warship's "illegal incursion" into the territory's waters was a challenge to British sovereignty.
Royal Navy boats were deployed after the Spanish vessel, with its guns manned, ordered commercial ships to leave British Gibraltar waters on Sunday, according to Gibraltar's government.
The warship's crew can be heard in an audio recording of a radio exchange telling vessels anchored at the Rock to "leave Spanish territorial waters", but boats which were ordered to leave remained at the port.
Downing Street said Gibraltar's sovereignty was not in doubt during the incident and the Prime Minister's official spokesman said: "There was no incursion on this occasion.
"We are certain of our sovereignty over the whole of Gibraltar including British Gibraltar Territory waters and any incursions are a violation of the sovereignty but not a threat to it."
However, a statement released by the Gibraltar government on Monday said the incident was "an illegal incursion which aimed to make a political point about the sovereignty of our waters".
"While this action in itself may not be a threat to sovereignty, because the waters remain British in international law, the reality is that it represented a challenge to our sovereignty and that it purported to undermine our sovereignty," it said.
Chief Minister of Gibraltar Fabian Picardo said: "The people of Gibraltar won't be bullied now or after the 29th of March.
"Incidents like this, however, are a useful reminder of why we will never agree to be Spanish."
The ship was accused by the Government of trying to take "executive action" against the commercial boats, which were anchored on the eastern side of the Rock.
Commercial boats which were told to move were ordered to remain by the Gibraltar Port Authority.
A crew member is heard in the recording asking the Spanish ship "to verify you are referring to our ship" because they are anchored in Gibraltar.
"We are not adrift, we are at anchor now," he says, before being told again to leave Spanish waters.
Mr Picardo added: "Anyone who believes in the rules-based international legal order will have been shocked by the cavalier and quixotic actions of the Spanish military vessel at the weekend.
"Her actions outside our waters, when she sought to direct shipping outside her jurisdiction, and when she sailed through our waters with her weapons naked, was an amateurish attempt at bravado."