Iran appears to have successfully test-fired a missile that military experts say is capable of hitting Israel, dramatically raising tensions in the Middle East over the country's nuclear ambitions.

The launch has also raised renewed questions about US President Barack Obama's strategy of using diplomacy to wring concessions out of Iran.

After the medium-range missile was launched from Semnan province in northern Iran, President Mahmoud Ahmadinejad told a cheering crowd the launch was a resounding success.

"With the help of God the Sajjil-2 missile, which has very advanced technology, was launched in Semnan and it landed precisely on target," he said.

In Washington, stony-faced US Defence Secretary Robert Gates conceded this was no idle boast.

"The information that I have read indicated that it was a successful flight test," he said.

"The missile will have a range of approximately 2,000 to 2,500 kilometres.

"Because of some of the problems they've had with their engines, we think at least at this stage of the testing it's probably closer to the lower end of that range."

Still, a lower range of 2,000 kilometres takes in Israel and a number of US military bases in the Gulf.

The launch probably was not a coincidence. It came on the first day of Iran's presidential election campaign.

This show of strength will not hurt Mr Ahmadinejad's electoral chances.

The test-firing also came just two days after the meeting at the White House between US President Barack Obama and Israel's Prime Minister Benjamin Netanyahu.

Iran's nuclear ambitions were the subject of intense discussion.

The Israeli leader says he will take military action against Iran if he feels his country is under threat of an Iranian missile strike.

But Mr Obama favours the use of diplomacy to bring an end to Iran's nuclear program.

In the light of the overnight launch, critics like former Bush administration official John Hannah are urging Mr Obama to re-think this approach.

"I just think there's very little evidence historically that simply through negotiations, through offering positive diplomatic incentives and through essentially taking a military threat off the table, that you can convince hostile anti-American states to give up their nuclear weapons program," he said.

"So I'm very sceptical."

The Obama Administration is deeply concerned about developments in Iran.

Secretary of State Hillary Clinton is worried about the consequences of Iran obtaining a nuclear weapon.

"A nuclear-armed Iran with a deliverable weapons system is going to spark an arms race in the Middle East and the greater region," she said.

Earlier this week Mr Obama said he was not willing to talk forever to Iran. This missile launch has probably reduced his timeframe even further.