TEHRAN -- A newly signed U.S. law demanding that the American Embassy in Israel be moved from Tel Aviv to Bait-ul-Moqaddas is "a blatant insult to Muslim countries" and a "provocation", an Iranian top Foreign Ministry official said Wednesday.

"This is a blatant insult to Muslim countries and shows the U.S. is profiteering from the current situation", Foreign Minister Kamal Kharrazi said.

The U.S. president approves such a bill while (Israeli Prime Minister Ariel) Sharon continues his brutal acts, profiteering from the Iraq crisis that has diverted world attention from the Palestinians, Kharrazi noted.

Government spokesman Abdollah Ramezanzadeh also told reporters that the U.S. Embassy's "transfer from the Zionist capital to Bait-ul-Moqaddas had also been discussed at cabinet level.

"For Iran, this is a provocation which goes against the interests of the region's Muslims," he told reporters.

"The Iranian government vigorously condemns this action. It will inspire hatred in the international community," he added.

"The cabinet stated that this is a move to exploit existing situation (in the region) which will increase hatred in the world community," Ramezanzadeh added.

The U.S. Congress on Monday stated in a bill that Al-Qods be identified by the State Department as Israel's capital and that the American Consulate in East Bait-ul-Moqaddas be placed under the supervision of the American Embassy in Tel Aviv.

U.S. President George W. Bush expressed some reservations about the bill, saying it didn't reflect the view of his administration.

He said the bill would impermissibly interfere with the president's constitutional authority to conduct the nation's foreign affairs.

Israel occupied Al-Qods in 1967 and has ever since been trying to obliterate its Arab-Islamic identity.

Al-Aqsa Mosque in Al-Qods is considered the third holiest shrine in Islam.