The measures go substantially beyond the sanctions the UN agreed on June 10 and are designed to pressure Tehran to return to talks over an uranium enrichment programme Western powers believe is designed to produce nuclear weapons.
The steps, which could come into force within weeks, will focus on trade, including dual-use items, banking and insurance, Iran's transport sector, including shipping and air cargo, and key sectors of the gas and oil industry.
The energy sector sanctions will prohibit “new investment, technical assistance and transfers of technologies, equipment and services related to these areas, in particular related to refining, liquefaction and Liquefied Natural Gas technology”, the heads of state and government said in their conclusions.
The measures go beyond what some diplomats had foreseen and are likely to put strong financial pressure on Iran, which is the world's fifth largest crude oil exporter but has little refining capability.
“The European Council deeply regrets that Iran has not taken the many opportunities which have been offered to it to remove the concerns of the international community over the nature of the Iranian nuclear programme,” the EU leaders said.
“Under these circumstances, new restrictive measures have become inevitable.”
Diplomats said some EU states, notably Germany, which has large investments in Iran's oil and gas sector, had concerns about strengthening the sanctions, but in the event all EU Member States moved quickly behind a strongly worded statement.
Iran denies its nuclear programme is aimed at producing weapons, saying it is for energy and other peaceful purposes.
The EU steps coincide with efforts by the US Congress to draw up its own set of additional measures against Iran designed to add bite to a recent UN sanctions package, parts of which were watered down by Russian and Chinese opposition.
The political impact of the UN steps was also undermined by Turkish and Brazilian votes against the package.
Russia criticised the EU for planning sanctions on top of the UN measures.
“We are extremely disappointed that neither the US nor the EU is heeding our calls to refrain from such steps,” Russian news agencies quoted Deputy Foreign Minister Sergei Ryabkov as saying.
The US Treasury blacklisted another state-controlled Iranian bank and targeted companies that it says are fronts for Iran's state shipping company IRISL as it looked to coordinate the tighter sanctions net with the EU.
It also took separate steps to squeeze Iran's energy sector by identifying 20 petroleum and petrochemical companies as being under Iranian government control – which puts them off limits to US businesses under a general trade embargo.