The country successfully test-fired its new missiles during the Islamic Republic's huge naval drills. The objective of the drills was to hone the navy's skills in fighting piracy and terrorism.
Valfajr, as the torpedo has been named, was sacked from the Navy's Qadir submarine towards a surface vessel, destroying its target. The naval drills will continue until March 1.
It is Trump's first package of penalties against Iran, reflecting his insistence on a tougher stance toward Tehran.
Last month, a U.S. Navy destroyer fired warning shots at four Iranian fast-attack vessels near the Strait of Hormuz after they closed in at high speed.
Footage put out by the navy forces showed the torpedo, fired from a submarine, blowing up a relict ship in Iran's territorial waters in the Persian Gulf.
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Iran's foreign ministry decried the new USA sanctions as "illegitimate".
Worldwide sanctions on Tehran were lifted in January of past year under a nuclear deal brokered in 2015 by Britain, France, Germany, China, Russia and the United States.
In 2006, Tehran tested what it called the world's fastest underwater missile, named Hoot, or Whale, with radar-evading qualities created to destroy submarines.
What will U.S.do if Iran is "unmoved by threats"?
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The shipping routes through the Bab el-Mandab and the Strait of Hormuz passing through the Yemeni and Iranian coasts are filled with tankers carrying millions of barrels of oil to Asia, the USA and Europe, round-the-clock.
This news comes just as tensions are rising between the Trump administration and Iran. Addressing the Munich Security Conference, Iranian Foreign Minister Mohammad Javad Zarif said Iran doesn't respond well to "threats", nor does it respond well to "coercion".
"We don't respond well to coercion".
Acknowledging the 1,000,000 people of Iranian descent living in America, Ahmadinejad said that U.S. policies should "value respect toward the diversity of nations and races". "Iran is unmoved by threats". It vowed counter-sanctions on American companies and firms. Iran argues that its ballistic missile program is also not covered by the resolution because it does not have a nuclear weapons program.
Almost a third of all oil traded by sea passes through the strait and it has been the scene of previous confrontations between the USA and Iran.
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"The enemy should not be mistaken in its assessments, and it will receive a strong slap in the face if it does make such a mistake", Gen. Pakpour warned.