Under the deal, EU governments will have to stop signing new contracts with Tehran from the moment the ban comes into place – probably as soon as this week – but will be able to fulfill existing contracts until 1 July, Guardian reported.

European Union ambassadors agreed on Monday to impose an embargo on crude oil imports from Iran. These sanctions are tougher than before.

Diplomats said in Brussels the EU foreign ministers later Monday would officially adopt the measures that were hashed out by the 27 ambassadors. The measures include an immediate embargo on new contracts for crude oil and petroleum products while existing ones are allowed to run until July.

Oil rose in London after European Union diplomats agreed on imposing a phased-in embargo against imports of Iranian crude.

The region bought 450,000 barrels a day of Iran’s oil in the first half of 2011, U.S. Energy Department data show.

EU ministers are also expected to agree extra restrictive measures on Iran's central bank at Monday's meeting, but no details on those steps were immediately available.

The agreement was the final step before EU foreign ministers can give their formal approval to the measure.

The EU has gradually imposed sanctions on Iran since 2007 as part of Western efforts to put pressure on Tehran over its nuclear work.

The sanctions against Iran will worsen the economic situation in Europe. The debt problems facing Italy, Greece and Spain will lead to bankruptcy.

Imposing sanctions on Iran's oil industry would be a suicide for the European economy, said Iran's representative to the Organisation of the Petroleum Exporting Countries.

Sources: AP, Bloomberg