Britain, France and Germany said the announcement was "particularly regrettable" at a time when talks have resumed in Vienna, including with the United States, to revive the 2015 nuclear deal which Washington reneged on under Donald Trump.

"This is a serious development since the production of highly enriched uranium constitutes an important step in the production of a nuclear weapon," the three countries said in a statement.

They said that the start of talks on reviving the nuclear deal between Iran and the world powers have been "substantive", with the aim of finding "a rapid diplomatic solution".

But they added that Iran's recent moves were "contrary to the constructive spirit and good faith of these discussions".

The step will bring Iran closer to the 90 percent purity threshold for military use and shorten its potential "breakout time" to build an atomic bomb -- a goal the Islamic republic denies.

Iran President Hassan Rouhani on Tuesday accused Israel of "nuclear terrorism", after the blast early Sunday knocked out electricity at the Natanz facility in central Iran.

Israel has neither confirmed nor denied involvement but public radio reports in the country said it was a sabotage operation by the Mossad spy agency, citing unnamed intelligence sources.

In possible reference to the attack, the statement by the European powers said: "In light of recent developments, we reject all escalatory measures by any actor, and we call upon Iran not to further complicate the diplomatic process."

Israel has often vowed it will stop Iran from ever building an atomic bomb, which it would regard as an existential threat to the Jewish state.

It is strongly opposed to US President Joe Biden's efforts to revive what it regards as the flawed nuclear agreement between Iran and the UN Security Council's five permanent members plus Germany.