US President George W. Bush last night accused Iran of fomenting instability in the Middle East, and said he had authorised the US military to take "necessary" action to counter its influence.
"The most important and immediate way to counter the ambitions of al-Qaeda and Iran and other forces of instability and terror is to win the fight in Iraq," Mr Bush said.
He also warned that extremist forces would be emboldened if the United States were driven out of the region, leaving Iran to pursue a nuclear weapon and set off an arms race.
"Iran could conclude that we were weak and could not stop them from gaining nuclear weapons," Mr Bush said.
The president and other US officials have long accused Iran of supplying weapons to insurgents in Iraq, but in a speech to veterans the president hardened his stance by lumping Tehran and al-Qaeda together.
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Mr Bush said US forces in Iraq have recently seized rockets manufactured in Iran and that attacks on American bases and troops with Iranian-supplied weapons had increased in the past few months.
He also said Tehran has sent arms to the Taliban in Afghanistan.
"The Iranian regime must halt these actions," Mr Bush said. "Until it does, I will take the actions necessary to protect our troops. I have authorized our military commanders in Iraq to confront Tehran's murderous activities."
His verbal attack on Iran came just hours after Iranian President Mahmoud Ahmadinejad said the power of the United States was rapidly collapsing in Iraq and that Tehran was ready to step in to help fill the vacuum.
The United States is leading efforts to isolate Iran over its nuclear program, which western countries contend is aimed at building bombs. Iran denies those accusations and says it is only seeking nuclear-generated electricity.
"The United States is rallying friends and allies to isolate Iran's regime and to impose economic sanctions," Mr Bush told veterans at the American Legion annual convention. "We will confront this danger before it is too late."
The UN Security Council has imposed two sets of sanctions on Tehran since December.
In response, Iranian president Mahmoud Ahmadinejad said Iran was ready to fill a vacuum in Iraq caused by the collapsing power of the US.
"The political power of the occupiers (of Iraq) is being destroyed rapidly and very soon we will be witnessing a great power vacuum in the region," said. "We, with the help of regional friends and the Iraqi nation, are ready to fill this void."
Saudi Arabia was one of the countries Iran was ready to work with, he said.
The region did not need countries from "thousands of kilometres away" to provide security, Mr Ahmadinejad said, and US and other forces in Iraq and Afghanistan had run out of solutions.
"They are trapped in the swamp of their own crimes," he said. "If you stay in Iraq for another 50 years nothing will improve, it will just worsen."
Mr Bush is reportedly preparing to ask Congress for as much as $50 billion in additional funding for the war in Iraq. The request signals increasing White House confidence that it can fend off mounting congressional pressure to begin withdrawing US troops from Iraq, the Washington Postreported.
The additional funds would come on top of about $460 billion in the fiscal 2008 defence budget and $147 billion in a pending supplemental bill to fund the wars in Afghanistan and Iraq.