Jerusalem, July 16, 2019 (AFP)

An Israeli NGO said Tuesday it was petitioning Gibraltar's top court to sell an impounded Iranian oil tanker to compensate parents of a child allegedly killed by Iran-funded Hamas.

Shurat Hadin, which wages legal battles worldwide against what it calls "Israel's enemies", says it won a $178.5 million US court judgement against Iran and Syria in 2017 over the death of an American infant killed in an attack in Jerusalem.

The Iranian tanker Grace I, capable of carrying two million barrels of oil, was seized on July 4 by police and customs officers in Gibraltar -- a British overseas territory on Spain's southern tip -- with the aid of a detachment of British Royal Marines.

US officials believe the tanker was destined for Syria to deliver oil, in violation of separate EU and US sanctions.

Shurat Hadin founder Nitzana Darshan-Leitner told AFP that the vessel's sale, if ordered by the Gibraltar Supreme Court, would not raise more than a fraction of the District of Columbia District Court's award, but it could pave the way for the seizure of other Iranian assets.

She said that the petition should be filed with the court on Tuesday but she did not know when or even if it would hold a hearing.

"Anything can happen," she said.

British Foreign Secretary Jeremy Hunt, seeking to ease tensions with Iran, said Saturday that the tanker would be released if Tehran guaranteed it was not bound for Syria.

In October 2014, Palestinian Abdelrahman Shaludi drove a car into two groups of pedestrians in Jerusalem, killing three-month-old Chaya Zissel Braun and a young woman.

He then leapt out of the vehicle and attacked passers-by with an iron bar, until police shot him dead.

Hamas hailed the attack in a statement, calling Shaludi one of its "hero-martyrs".