"Israel, and not only Israel, cannot accept a situation in which Iran would be in possession of nuclear weapons," Prime Minister Ariel Sharon told journalists in Tel Aviv.

"We must do everything possible to prepare for such a situation. But Israel is not spearheading any campaign" against Iran's suspected nuclear weapons ambitions, he added.

"It is not only a danger for Israel but for the Middle East as a whole and for other countries."

Sharon was speaking after his defence minister, Shaul Mofaz, said that international diplomacy and pressure were the best way of confronting Iran over its nuclear ambitions.

"The diplomatic track is the best way of dealing with the Iranian atomic programme," Mofaz told army radio.

"We must do everything to put this hot potato before the UN Security Council so that sanctions and tight controls of the Iranian nuclear installations will be imposed," he said.

"The challenge posed by Iran is not only a danger for Israel but for the entire free world, and the United States and the Europeans are aware of this danger."

Since the downfall of Saddam Hussein's regime in Iraq, Israel has come to regard Iran as its number one enemy.

Iranian President Mahmoud Ahmadinejad caused an international backlash in October when he called for the Jewish state to be "wiped off the map".

In a bid to defuse the row the Iranian foreign ministry said that Tehran had "never resorted to, nor threatened to resort to force against another country."

Israel, which has never admitted having but is widely believed to possess around 200 nuclear warheads, carried out an air strike against Iraq's French-built Osirak nuclear plant in 1981.

Mofaz, who was himself born in Iran, has previously hinted that Israel could take pre-emptive military action to halt the Islamic republic's quest for nuclear capabilities.

The International Atomic Energy Agency (IAEA) in September found Iran in non-compliance with the nuclear Non-Proliferation Treaty, paving the way for the matter to be referred to the UN Security Council if Iran does not halt nuclear fuel work and cooperate fully with an IAEA investigation.

Iran has insisted that its nuclear programme is merely designed to meet domestic energy needs.

Israel has repeatedly warned Iran may be close to developing a nuclear weapon, with Foreign Minister Silvan Shalom saying in October that Iran might be as little as six months away from having the necessary means.

A senior defence official said in an interview published Thursday in the Maariv daily that Israel would have to "resign itself" to the idea of a nuclear Iran.

"I don't see any force that can turn things around -- to wit, Iran going nuclear -- and there is going to be no choice but to resign outselves to that inchoate reality," he told the paper.

US Vice President Dick Cheney fuelled speculation about a possible pre-emptive Israeli strike in a television interview earlier this year.

"Given the fact that Iran has a stated policy that their objective is the destruction of Israel, the Israelis might well decide to act first, and let the rest of the world worry about cleaning up the diplomatic mess afterwards," he said.

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