Foreign Secretary Jeremy Hunt has warned of the "great risk" of a drift to war with Iran following the attacks last week in the Gulf on two oil tankers.
Saudi Arabia's Crown Prince Mohammed bin Salman has joined Britain and the United States in blaming the Iranians for the attacks – a claim which Tehran has strongly denied.
The incidents caused oil prices to soar amid heightened fears of a conflict in the region causing major disruption to world supplies.
Mr Hunt said Britain was urging all sides in the dispute to "de-escalate" in order to avoid a slide into armed conflict.
"This is the great risk of the situation that we are in. Both sides in this dispute think that the other side wouldn't want a war. We are urging all sides to de-escalate," he told BBC1's The Andrew Marr Show.
"Having spoke to President Trump, I am absolutely clear that for America they want this to end in negotiations.
"Let's see Iran stop its destabilising activities in Lebanon through Hezbollah, in Yemen where they are firing missiles into Saudi Arabia, on the Gulf as we have seen. That is the long-term solution."
Tensions in the region have been rising since the Trump administration pulled out of the Iran nuclear deal and reimposed punishing economic sanctions on Tehran.
The Americans have accused Iran of using limpet mines to target the tankers, pointing to video footage said to show Iranian Revolutionary Guard troops removing an unexploded mine from one of the vessels.
In recent weeks, the US has sent an aircraft carrier strike group and other military assets to the region in what the military says is defensive posturing aimed at Iranian deterrence.
Britain's ambassador to Tehran Rob Macaire, meanwhile, has denied Iranian media reports that he had been summoned to the Foreign Ministry in protest at the UK's "unacceptable anti-Iran stances".
Mr Macaire said he had sought the meeting himself.
"Interesting. And news to me," he tweeted.
"I asked for an urgent meeting with the Foreign Ministry yesterday and it was granted. No 'summons'. Of course if formally summoned I would always respond, as would all ambassadors."
In his interview, Mr Hunt defended the Foreign Office's assertion that Iran was "almost certain" to blame for the attacks on the tankers.
"We have done our own intelligence assessment. We have got videos of what happened. We have seen evidence. We don't believe anyone else could have done this," he said.