Iran has vehemently denied allegations made by the U.S. on Tuesday that the country and its elite Quds force plotted an elaborate assassination of the Saudi ambassador to Washington that involved Mexican drug traffickers and a bomb being set off in a Washington restaurant.

Mansour Arbabsiar, a U.S. citizen and member of Iran's special foreign actions unit known as the Quds Force, was charged in New York federal court Tuesday with conspiring to kill Adel al-Jubeir, the Saudi ambassador to the U.S. (AP)

To rationalize the seemingly unbelievable story, conspiracy theories are now being published by both sides.

In Iran, the U.N. ambassador has accused the U.S. of making up the plot as “warmongering,” and an attempt to distract the American public from social and economic troubles at home

The Fars News Agency echoed the sentiment Wednesday, reporting that the U.S. fabricated the plot to divert the world’s attention from the Wall Street uprising.

“No doubt this is a new American-Zionist plot to divert the public opinion from the crisis Obama is grappling with ... a popular uprising called Wall Street protests,” said Alaoddin Boroujerdi, chairman of the Iranian parliament’s National Security and Foreign Policy Commission.

The Islamic Republic news agency, for its part, quoted the chairman of Iran’s parliament, Ali Larijani, as saying that the U.S. was simply playing its “latest childish game” against Iran, and that the accusation had clearly been orchestrated “to create crises for regional states” and conceal America’s economic problems.

Even in America, many analysts and journalists said the story seemed “unbelievable” or made no sense.

CNN’s Ben Wedeman tweeted Wednesday morning: “Many in the know say the alleged Iran plot to assassinate Saudi ambassador to U.S. doesn’t quite add up. Bad Hollywood script?”

To reconcile the story, well-known Middle East scholar Juan Cole suggested that an Iranian drug cartel could be behind the plot instead, pointing out that half of Afghanistan’s opium and heroin is exported via Iran.

“If a rogue Iranian drug cartel ... wanted to hit the Saudi ambassador, then it would be natural for them to reach out to their counterparts, the Zetas in Mexico,” Cole writes. “Whereas if the Iranian state wanted to assassinate someone, it would be crazy for them to reveal themselves to a Mexican gangster.”

The Wall Street Journal, while not making a direct conspiracy theory, published an article about the plot that linked it to the 9/11 attacks in the very first line.

“One month to the day after the 10th anniversary of 9/11 comes a sobering moment in the history of the U.S. war on terror. ... ‘Factions of the Iranian government’ plotted to assassinate Saudi Arabia's ambassador to the United States,” the paper reports.

And in the New York Times, Neil MacFarquhar reported that some analysts wondered whether the plot was actually a “rogue operation launched by zealots within the group.

Amid all the conspiracy theories, the U.S. government stood staunchly behind its claim, promising isolation for Iran and possible sanctions.