Prime Minister Ehud Olmert raised the idea of a naval blockade in talks with the Democratic speaker of the US House of Representatives, Nancy Pelosi, during her visit to Jerusalem, the Haaretz newspaper said.

"The present economic sanctions on Iran have exhausted themselves," Olmert was quoted as saying in the meeting Tuesday. "The international community must impose tougher sanctions against Tehran."

The UN Security Council has imposed three sets of sanctions on Iran aimed at pressuring it to halt uranium enrichment which Israel and many Western powers suspect will be used to develop an atomic bomb -- a charge Tehran denies.

Asked about the blockade report, Olmert's spokesman Mark Regev would say only: "We do not confirm this information."

Olmert also spoke about imposing air travel restrictions which he said would prevent Iranian business people "from landing anywhere in the world which would touch off pressure on the regime," according to Haaretz.

Rafi Eitan, a member of Olmert's security cabinet, told public radio Wednesday that "a blockade of maritime and air routes against Iran is a good possibility."

Israel, which is believed to be only, if undeclared, nuclear armed state in the Middle East, is also pushing for tougher sanctions against Tehran, especially from European countries.

"It is time that the European Union take quicker action and impose much more severe economic sanctions than those adopted by the United Nations," said foreign ministry spokesman Arye Mekel.

Iran, OPEC's second biggest oil exporter, has refused to heed international demands to halt uranium enrichment, insisting it has a right to the process to make nuclear fuel to meet its increasing energy needs.

Highly enriched uranium can also make the fissile core of an atom bomb, but Tehran has vehemently denied it is seeking to acquire nuclear weapons.

The UN nuclear watchdog, the International Atomic Energy Agency, has been trying to determine the nature and extent of Iran's nuclear work.

IAEA chief Mohamed ElBaradei is due to report in June on Iran's nuclear programme to the body's board of governors and the UN Security Council.

Israel says Iran is not only a major threat to the Jewish state but also the international community, pointing to Iranian President Mahmoud Ahmadinejad's comments that Israel should be wiped off the map.

Still, Eitan told public radio: "There are voices, we hear, in Washington that indicate the military option remains open."

Political observers however said a blockade would be difficult to impose and would have major economic effects.

"The international community would have to accept a new spike in oil prices, without Iranian crude in the market," said Ephraim Kam, deputy director of the independent Institute for National Security Studies.

"In addition the Iranians would not hesitate to tory to block the exports of crude from all the countries in the Gulf," he added.

Iran on Wednesday indicated it was ready to enter "serious and targeted" negotiations with world powers on a wide range of issues, including nuclear energy, according to a translation of proposals posted on the Institute for Science and International Security website.

The ISIS also said in a study that Iran's nuclear drive could trigger a race to develop atomic weapons in the Middle East.

"We take it for granted that Iran is pursuing a nuclear weapon," said ISIS expert Mark Fitzpatrick, adding that Tehran could theoretically produce enough uranium for a bomb by 2009.

earlier related report
US looking for progress in Iran nuclear report: envoy
The United States is looking for clear signs of improvement on the Iranian nuclear dossier in an upcoming report from the UN atomic watchdog, the US envoy on Iran said on Wednesday.

"We are looking for progress," US ambassador Gregory Schulte told reporters at the International Atomic Energy Agency (IAEA) headquarters in Vienna.

He said Washington was waiting to see whether Iran had been prepared to give a detailed response to allegations -- backed up by intelligence from a number different sources -- that it had been in involved in weaponisation studies in the past.

The US also wanted to see readiness on Tehran's part to implement the so-called Additional Protocol, part of the Nuclear Non-Proliferation Treaty (NPT) which gives IAEA inspectors the right to carry out unannounced checks at nuclear sites.

"And we're also waiting to see whether Iran is prepared to suspend uranium enrichment," a process used to make the fissile material for an atomic bomb, Schulte said.

The IAEA's last report on Iran back in February contained intelligence showing the Islamic republic had engaged in studies, engineering work and procurement relevant to the design and weaponisation of a nuclear device.

At the time, Iran simply dismissed the allegations as baseless and the intelligence used to back it up as fake.

But the IAEA insisted that such a response was not acceptable and Tehran must present evidence to prove it was not engaged in any such studies.

IAEA inspectors have made a number of visits to Tehran in recent weeks to discuss the issue.

Diplomats close to the IAEA say the agency's latest report could be circulated to governors at the end of this week or early next week so that it can be discussed by the board at a meeting at the beginning of June.

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