US President George Bush phoned Denmark's Prime Minister Anders Fogh Rasmussen on Tuesday, in a display of solidarity between the two countries.
It followed attacks on several Danish embassies
by Muslims venting their anger over the publication of Mohammad caricatures.
White House spokesman Scott McClellan said, "The two leaders are in agreement that all sides concerned need to choose a path of dialogue and understanding, thereby rejecting violence."
Meanwhile, International peacekeepers clashed with demonstrators in Afghanistan who were protesting in a remote northern city against the caricatures. The clashes left three demonstrators dead and forced NATO to send in more troops.
Senior Afghan officials said that al-Qaida and the Taliban could be exploiting anger over the cartoons to incite violence, which spread to at least six cities in a second day of bloody unrest in Afghanistan.
Violence has escalated sharply in Afghanistan this week, where seven people have died in the past two days.
UN Secretary-General Kofi Annan, the leader of the Organization of Islamic Conference and the European Union's foreign policy chief, condemned the violence and appealed for calm.
"Aggression against life and property can only damage the image of a peaceful Islam," said a statement released Tuesday by Annan, the EU's Javier Solana and Ekmeleddin Ihsanoglu of the OIC.
In a new turn, a prominent Iranian newspaper, Hamshahri, invited artists to enter a Holocaust cartoon competition, saying it wanted to see if freedom of expression the banner under which many Western publications reprinted the prophet drawings also applied to Holocaust images.
Earlier Tuesday, Iran also announced the suspension of all trade and economic ties with Denmark and declared that it will bar all Danish products from entering the country in protest of the caricatures.
Commerce Minister Masoud Mirkazemi told state-run radio that beginning Tuesday all contracts and negotiations with Danish companies will be suspended.
"No consumer goods from Denmark will receive registration order and goods with Denmark as origin will be prevented from entering through customs," Mirkazemi said.
The minister had said a day earlier that Iran would not allow any new permits for Danish goods, but his announcement Tuesday appeared to go a step further, suspending all existing contracts.
The European Union warned Iran Tuesday that attempts to boycott Danish goods or cancel trade contracts with European countries would lead to a further rupture in already cool relations. EU spokesman Johannes Laitenberger said the EU would take measures against any countries, including Iran, if they sought to boycott European goods.
"A boycott of Danish goods is by definition a boycott of European goods," Laitenberger said. "A boycott hurts the economic interests of all parties, also those who are boycotting and can damage the growing trade links between the EU and the countries concerned.
Mirkazemi said Iran will also substantially raise charges on Danish-flagged vessels docking at Iranian ports. The largest shipping firm in the world is Denmark's AP Moller-Maersk A/S.
The cartoons of Muhammad, first published in a Danish newspaper in September and since reprinted in numerous European papers, have sparked widespread protests in the Islamic world and several unofficial boycotts.
Danish exports to Iran total around $280 million a year.