"We do not want the tension with European countries to continue. If they act within the framework of international law and stop their illegal actions such as what they did in Gibraltar, they will receive a proportionate response," the president told a Cabinet meeting in Tehran without elaborating, his website reported.
Rouhani was referring to Britain's seizure on July 4 of the Iranian tanker Grace 1 off the coast of the British Mediterranean territory of Gibraltar on suspicion of violating European sanctions against Syria.
Iran, which has repeatedly called for the ship's release, says no European Union sanctions are applicable to non-EU member states, but denied that the tanker was taking oil to Syria. It contends that the UK was goaded by the United States to seize the vessel in order to increase the heat on the Islamic Republic, according to Financial Tribune.
Earlier this month, Gibraltar was granted the power to detain the Iranian tanker for another month.
Tensions between Tehran and London spiked further after Iranian forces seized a British-flagged tanker, Stena Impero, in the Strait of Hormuz on July 19, saying it had collided with a fishing vessel and ignored distress calls. Britain has called on Iran to release the ship and its crew.
Rouhani said the Persian Gulf is very important to Iran and the country's military forces will not allow any action that could undermine the security of the strategically important Strait of Hormuz—a crucial chokepoint for oil flows.
"We will not let anyone disrupt the stability of Persian Gulf and Strait of Hormuz. This is while we do not want tensions and military confrontation. Whatever measure we have taken so far has been proportional to the violations of the other side," he said.
"Just" Negotiations
The president also said his administration has always favored dialogue as a means to break deadlocks in different areas, but only accepts "just" negotiations.
Rouhani seemed to be referring to possible negotiations with the United States. US President Donald Trump withdrew from a landmark 2015 nuclear deal with Iran last year and reimposed sanctions, but has said he is willing to hold talks with the Islamic Republic.
"We are always completely ready for just and respectful negotiations, but at the same time we are not ready to sit at the table of surrender under the name of negotiations," he said.
Rouhani stressed that all steps taken by Tehran to scale back its commitments under the nuclear deal in response to the US unilateral withdrawal and Europe's failure to secure Iran's economic interests are "reversible".
"If the other side takes appropriate measures and a reprieve is achieved in the [US] economic war [against Iran], an opportunity will be created to hold talks and reach a conclusion. Some countries are acting as mediators and correspondence is taking place. Everyone should know that we will never miss an opportunity for dialogue," the president told members of his Cabinet.