Iran's Revolutionary Guards have detained a container ship near the Strait of Hormuz, Iran's official IRNA news agency reported on Saturday.
Footage provided to the news agency Associated Press showed commandos rappelling down from a helicopter and raiding the ship.
The vessel has been linked to Zodiac Group, a shipping company owned by Israeli billionaire Eyal Ofer.
Israel condemned the incident as an act of piracy amid rising tensions between the two countries.
UK Maritime Trade Operations (UKMTO) also said that a ship had been seized by regional authorities 50 nautical miles (92 km) northeast of the UAE port of Fujairah. A US defense official said "we are aware of the situation reported by UKMTO and we are monitoring it."
What do we know about the ship?
The vessel was identified as the MSC Aries, a Portuguese-flagged container ship.
"We regret to confirm that MSC Aries... has been boarded by Iranian authorities via helicopter as she passed the Strait of Hormuz at approximately 0243 UTC this morning," MSC said in a statement on Saturday.
"She has 25 crew onboard, and we are working closely with the relevant authorities to ensure their wellbeing, and safe return of the vessel."
The vessel was associated with London-based Zodiac Maritime, itself part of Israeli billionaire Eyal Ofer's Zodiac Group.
An Indian government official who spoke on the condition of anonymity told the Associated Press that 17 of the crew were Indians.
According to the maritime tracking service Vessel Finder, the ship was on its way from the United Arab Emirates to India via the Strait of Hormuz, one of the world's most important oil shipping routes.
Israel condemns 'pirate operation'
Israel's Foreign Minister Israel Katz said the ship raid was an act of piracy.
"The Ayatollah regime of Khamenei is a criminal regime that supports Hamas' crimes and is now conducting a pirate operation in violation of international law," Katz said on social media.
"I call on the European Union and the free world to immediately declare the Iranian Revolutionary Guards corps as a terrorist organization and to sanction Iran now."
The United States also called the incident a violation of international law.
"We call on Iran to release the vessel and its international crew immediately," said National Security Council spokesperson Adrienne Watson.
"Seizing a civilian vessel without provocation is a blatant violation of international law, and an act of piracy by the Islamic Revolutionary Guards Corps."
The ship seizure after Iran threatened to attack Israel in response to an airstrike on an Iranian consular building in Syria on April 1 that killed a number of Iranian generals.
In response to the ship seizure on Saturday, Israeli military spokesperson Rear Admiral Daniel Hagari said that "Iran will bear consequences for choosing to escalate this situation any further."
Israeli forces on full alert
On Saturday evening, the Israel Defense Forces (IDF) said it was on full alert for a potential Iranian attack.
Hagari said dozens of combat planes were airborne as part of the state of readiness.
Israel also closed schools over security concerns, the IDF said.
Jordan, which neighbors Israel, will temporarily shut its airspace to incoming, departing and transit planes, the Jordanian state news outlet al-Mamlaka reported.
