Interior Minister Sheikh Rashid Bin Abdullah al-Khalifa described the incident as "an act of sabotage and a unsafe act of terrorism aimed at harming supreme interests of the homeland and safety of the people".
Bahrain says an oil pipeline that exploded overnight was attacked by militants in the island nation. The fire service also evacuated homes in the nearby village of Buri, 15km south of Manama, it added.
Foreign Ministry spokesman Bahram Ghasemi was quoted by the state-run IRNA news agency Sunday (local time) as rejecting the "baseless and fake claims" and "childish finger-pointing" from Bahraini authorities. He did not say what caused the explosion, nor did he name any suspects.
Bahrain relies on the Abu Safa field, which it shares with neighboring Saudi Arabia, for much of its oil, pumped in via a 230,000-barrel-per-day pipeline.
The official source reiterated Saudi Arabia's condemnation of the acts of sabotage and terror being perpetrated by Iran in order to destabilize the region and its security and the safety of its citizens and expatriates.
Iran has denied allegations it was behind a militant attack on a pipeline outside Bahrain's capital.
Bahraini authorities have blamed an oil pipe blast that occurred in the country on Iran, calling it "an act of sabotage and a unsafe act of terrorism".
Bahrain is home to the US Navy's Fifth Fleet and a British army base is now under construction.
However, that campaign of bombings and shootings had not seen the island's oil infrastructure targeted, even immediately after Emirati and Saudi forces helped Bahrain put down its 2011 Arab Spring protests.
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