"I think as far as I can see, it is America, which is making all the provocation," Mahathir told CNBC's Tanvir Gill on Saturday, when asked which side might be responsible for miscalculations.
"First, they withdrew from the (nuclear) treaty, and now they're sending warships to the Gulf, and doing things that will provoke Iran," he told CNBC in Bangkok, Thailand where Asian leaders were gathered for the Association of Southeast Asian Nations summit.
Tensions between the the U.S. and Iran tested new highs on Thursday, when Tehran shot down an unmanned American military spy drone.
The shooting of the drone prompted U.S. President Donald Trump to approve military strikes on several Iranian targets — but he abruptly called off the attacks late Thursday. The president said he withdrew the plan because he believed the loss of life — estimated to be about 150 people — would have been disproportionate to the downing of an unmanned drone.
"I am in no hurry," Trump said on Twitter Friday. "Our Military is rebuilt, new, and ready to go."
Even before the latest escalation in tensions, the two countries appeared to be heading closer toward a military conflict — although both sides have said it's something they hope to avoid. The Pentagon has in recent months announced plans to deploy thousands of troops to the Middle East to counter Iran, amid allegations the Islamic country was responsible for attacks on oil tankers in the region. Tehran has rejected those accusations.
Mahathir on Saturday warned: "If they go to war, it will not be Iran against America. It will be a world war." He explained that other countries that do not want to see nuclear weapons being used "will have to come in and put a stop to it."
The Trump administration unilaterally pulled out of an international nuclear treaty with Iran in May last year. Since then, the U.S. has reinstated punishing sanctions on the Islamic Republic's vital oil industry, aimed at crippling its economy.
Malaysia's 93-year-old leader warned that energy prices will likely go up because "we are knocking out Iran as one of the big suppliers."
"Actually the sanction is against Malaysia also," Mahathir said. "Because we can't trade with a good trading partner that Iran provides for us."
He disagreed with the U.S. sanctions against Iran, saying: "This kind of play of applying sanctions and forcing other countries to comply with the big power's decision is totally undemocratic ... This is bullying."
Mahathir called Trump "totally unpredictable" and said that "this one man, with one more term to go, can do a lot of damage to the whole world."