Foreign Secretary Dominic Raab condemned the attack as "unlawful and callous".
In a statement, Mr Raab said: "The UK condemns the unlawful and callous attack committed on a merchant vessel off the coast of Oman, which killed a British and a Romanian national.
"Our thoughts are with the friends and family of those killed in the incident.
"We believe this attack was deliberate, targeted, and a clear violation of international law by Iran."
Iran denied responsibility after Israel’s prime minister directly blamed it for the attack, but Mr Raab said the UK government backed Naftali Bennett’s claim.
The Zodiac Maritime vessel came under attack late on Thursday night by drone. The boat is linked to Israeli billionaire Eyal Ofer's who owns the Zodiac Group.
It comes amid heightened tensions between it and Iran as negotiations remain stalled over Tehran’s nuclear deal with world powers.
"Iran must end such attacks, and vessels must be allowed to navigate freely in accordance with international law," Mr Raab said.
"The UK is working with our international partners on a concerted response to this unacceptable attack."
Calling Peston - The ITV News political podcast
Lisa Nandy, Labour’s Shadow Foreign Secretary, described the attack as a "a flagrant breach of international law."
She added: "It is tragic that this has led to the death of two sailors, including one Briton. We send our deepest condolences to their families.
"The Prime Minister must make it clear to the incoming Iranian President that lawless actions will carry costs. This is the moment where Britain must show we are resolute in our determination to end this pattern of behaviour.
"The breakdown of a clear strategy to deal with Iran has not served the UK or our allies well in recent years. The Foreign Secretary must now make it a priority to pursue coordinated international efforts to tackle these actions by the Iranian government."