Gulf Arab states plan to meet next week to discuss a territorial dispute between the United Arab Emirates and Iran which flared after the Iranian president visited a tiny Gulf island that both claim, a source familiar with the matter said on Saturday.

The UAE recalled its ambassador from Tehran on Wednesday after Mahmoud Ahmadinejad visited Abu Musa island, 60 km (40 miles) off the UAE as part of a tour of Iran's Gulf coast.

Ahmadinejad's visit "is a flagrant violation of the United Arab Emirates' sovereignty over its territory," UAE Foreign Minister Sheikh Abdullah bin Zayed al-Nahayan was quoted as saying by state news agency WAM on Wednesday.

A meeting of foreign ministers of the Gulf Cooperation Council will be held on Wednesday in the Saudi capital Riyadh, the source told Reuters.

"This will be an extraordinary meeting which was called for by the UAE following Mahmoud Ahmadinejad's visit," the source added.

Both countries claim Abu Musa and two other small islands, located near key shipping lanes in the Strait of Hormuz at the mouth of the Gulf. Iran took control of the islands in 1971, shorly before the Gulf emirates gained full independence from Britain and formed the UAE.

The islands are valued for their strategic position in the Strait and for their potential oil reserves.

The UAE also cancelled a friendly match with Iran's national soccer team, due to be held on Tuesday in the Gulf Arab state, in protest against Ahmadinejad's visit.

Iran said Ahmadinejad's visit was an "internal Iranian matter". Tehran said it was determined to improve bilateral ties and was ready for a dialogue with the UAE to resolve "possible misunderstandings".

On Saturday, the secretary-general of Iran's Expediency Council, Mohsen Rezaei, defended Ahmadinejad's visit and criticised the UAE's actions as hasty and premature.

"At a time when Israel bangs the drum of war, what benefit does this behaviour from our friends in the Emirates have? It is better that they apologise and stop following the Zionists (Israelis) because the region needs peace and cooperation," Rezaei said during a meeting of the council's defence and security committee.

The UAE has urged Tehran to agree to take the dispute to the International Court of Justice in The Hague or to hold direct negotiations but Iran says its sovereignty over the islands is not negotiable.