"The measures agreed to today by the EU Foreign Affairs Council are another strong step in the international effort to dramatically increase the pressure on Iran," Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton said in a statement.
Under the sanctions, the 27 members agreed not to sign new oil contracts with Iran and to sever existing contracts by July 1, The New York Times reported. Ministers also agreed to financial sanctions against the Iranian central bank and to restrict exports of gold and "dual-use goods and technology."
The agreement permits a review of the economic impact of the sanctions on countries such as Greece that are heavily reliant on Iranian oil. Greek officials sought more time to find new oil sources to help blunt the impact of sanctions on their debt-ridden economy.
Clinton and Geithner said the EU's move was consistent with previous punitive measures and new U.S. sanction against Iran that President Obama signed into law Dec. 31.
"Taken in combination with the many other sanctions on Iran that continue to be implemented by the United States and the international community, this new, concerted pressure will sharpen the choice for Iran's leaders and increase their cost of defiance of basic international obligations," the statement said.
In Brussels, where the foreign ministers met, British Foreign Secretary William Hague said the decision showed the resolve of the European Union and of the international community and was "absolutely the right thing to do."
"These tough sanctions are an essential next step in making clear that we expect Tehran to change its ways and to prove that its nuclear program is not arms related," Dutch Foreign Minister Uri Rosenthal said. "Now is not the time to speculate on any further measures or whether they are on the table or not."
Western leaders say they believe Iran wants to develop nuclear weapon capability; Iran maintains its nuclear program is for civilian uses.
Tehran has threatened to retaliate to sanctions by blocking the Strait of Hormuz, a vital oil transit corridor.
"Any attempt to close the Strait of Hormuz would be illegal and I believe would be unsuccessful," Hague said Monday.
Ministers told the Times they fear Asian governments will try to fill the gap left by European buyers and said they would use diplomacy to argue against that possibility.
The measures are "peaceful and legitimate," Hague said. "They are not about conflict. I hope Iran will come to its senses on this issue and agree to negotiate."
Iran recently signaled it may be ready to resume talks about its nuclear program. Talks with the United States, China, Russia, France, Germany and Britain were suspended a year ago.