The tough rhetoric triggered accusations from the White House that Iran was seeking to escalate the standoff ahead of a UN deadline Friday for the Islamic regime to freeze uranium enrichment.

"It's time for the Security Council to look at the next step," White House spokesman Scott McLellan said. "It's time for the Security Council to look at what action needs to be taken for this regime's continued defiance."

Although Tehran has so far refused to comply with the demands, diplomats in Vienna said Iran's Atomic Energy Organisation chief Gholam Reza Aghazadeh would hold last-minute talks Wednesday with the UN's nuclear watchdog.

The meetings are behind held ahead of a report from the International Atomic Energy Agency director general Mohamed ElBaradei, which McClellan said the White House expected "will show that the regime remains in non-compliance with its obligations."

The IAEA has been investigating Iran for more than three years, and any cut in ties would spell an end to international inspections and monitoring of nuclear facilities inside the Islamic republic.

Iran denies claims it is seeking to build nuclear weapons and says it only wants to enrich to make reactor fuel for power plants, although the process can be extended to make the core of an atomic bomb.

"If you decide to use sanctions against us, our relations with the agency will be suspended," said the country's national security chief and top nuclear negotiator Ali Larijani.

"Military action against Iran will not lead to the closure of the programme," Larijani said. "If you take harsh measures, we will hide this programme. Then you cannot solve the nuclear issue.

He also refused to rule out using oil as a weapon in the worsening standoff, warning of "important consequences" for energy supplies if Iran was subjected to "radical measures".

The fresh barrage of threats came the day after hardline President Mahmoud Ahmadinejad warned that Iran could quit the Non-Proliferation Treaty, but nonetheless confidently dismissed any threat of sanctions or even a US attack.

Iran's refusal to comply with the Security Council demand -- as well as its promise to expand enrichment work to reach an industrial-scale capacity -- leaves it exposed to the danger of UN sanctions.

The United States has also not ruled out military action.

"The US president does not take any options off the table but we are on a diplomatic course here, that is the agenda that we are pursuing," US Secretary of State Condoleezza Rice said, adding that "the Iranians can threaten, but they are deepening their own isolation."

But she added on a visit to Athens: "The agenda is to reinforce our diplomatic effort."

Iran is the world's fourth largest crude producer and the second-biggest in the Organization of Petroleum Exporting Countries (OPEC) and the tensions have already helped push crude prices to record highs.

"Iran will not start a crisis," Larijani told reporters when asked if the country would use its vast oil reserves as a weapon in the dispute. "But if we are subjected to radical measures, that will automatically have important consequences for oil."

In a meeting with visiting Sudanese President Omar al-Beshir, supreme leader Ayatollah Ali Khamenei said Iran was ready to transfer its nuclear technology to other countries, state media reported.

At the United Nations, US ambassador John Bolton said the Security Council was to consider a draft resolution that would legally require Iran to comply with demands that it freeze all uranium enrichment activities.

This would use Chapter 7 of the UN Charter, which is invoked in case of threats to international peace and security, and can open the door to sanctions or even military action.

France meanwhile confirmed that the Security Council's five permanent members plus Germany plan to meet in Paris on May 2 to thrash out a strategy.

China, one of the five, insisted the nuclear issue could still be resolved through negotiations, and called on all sides to show "flexibility".

Iran's war of words with Israel also worsened, with the Jewish state's former premier Shimon Peres comparing Ahmadinejad to Adolf Hitler.

"This is the first man since Hitler to stand up and say that the Jewish people must be exterminated," the Nobel peace prize winner said as the Jewish state observed a day of remembrance for victims of the Nazi genocide.

Ahmadinejad, who has dismissed the Holocaust as a "myth", had on Monday asserted that the "fake" Jewish state "cannot survive" and called on immigrants to the country to go back to where they came from.

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