President Anura Kumara Dissanayake said in a televised address that his country's navy had offloaded 208 sailors from the IRIS Bushehr, which had requested port entry due to engine trouble.

The Bushehr, like the ship torpedoed off Sri Lanka's southern coast on Wednesday, the IRIS Dena, had recently participated in a naval exercise in eastern India, Dissanayake said.

At least 84 sailors were killed in the torpedo attack, which was the first military strike far outside the Middle East region since the United States and Israel launched their war on Iran.

Iran's Foreign Minister Abbas Araghchi on Thursday denounced the attack and warned Washington it would "bitterly regret" establishing such a precedent.

Dissanayake said his country was "not taking sides in this conflict".

"But while maintaining our neutrality we are taking action to save lives," he said.

"No person should die in a war like this. Every life is equally precious."

The Bushehr was close to Colombo, the nation's main seaport, but it will not be anchored there due to the risk to merchant shipping, the president said, noting possible increases in insurance rates.

The ship will therefore be taken to the smaller Trincomalee port on the north-eastern side of the island, he said.

- Morgue overloaded -

Meanwhile in the southern port city of Galle, where the recovered bodies of the 84 Iranian sailors were taken, authorities began an inquest into the deaths.

With the local morgue only able to handle about 25 bodies at a time, hospital staff said authorities were rushing to set up refrigerated shipping containers to preserve the remains until legal formalities were completed.

Navy spokesman Buddhika Sampath said authorities were continuing the search for missing sailors.

Sri Lanka earlier said that there were 180 people on board the ship -- more than the Iranian figure of 130 -- when it was struck by a torpedo.

The US defence secretary on Wednesday said the strike was the first by an American submarine since World War II.

- Tight protection -

Medical staff said 32 rescued Iranians were still being treated under tight security provided by police and elite commandos at the hospital, adding that the walking wounded would be discharged soon.

The International Committee of the Red Cross (ICRC) said it was assessing the situation and was working with the local authorities.

"Our priority is to ensure that all the wounded, sick and shipwrecked receive the assistance they are entitled to without delay," the ICRC spokesperson in Colombo, Ruwanthi Jayasundare, told AFP.

The emergency treatment unit of the district's main hospital was off-limits to visitors and other patients, with medical authorities setting up a separate ward for the wounded Iranians.

"Most of them have minor injuries, but there were a few with fractures and burns," a nurse at the hospital said, without giving her name.

Sri Lanka has remained neutral and has repeatedly urged dialogue to resolve the conflict in the Middle East.

Iran is a key buyer of Sri Lankan tea, the country's main export commodity.