Israeli Defence Minister Ehud Barak said today he favoured the use of diplomatic pressure and sanctions against Iran's nuclear programme but cautioned that Israel was "not afraid to take action".
"Currently, the focus is international sanctions and vigorous diplomatic activity, and these avenues should be exhausted," Mr Barak said in a speech.
But he added: "Israel is the strongest country in the region and has proved in the past it is not afraid to take action when its vital security interests are at stake."
Mr Barak, leader of the centre-left Labour party, made the comments two days after an aide to Iran's Supreme Leader was quoted as saying his country would hit Tel Aviv, US shipping in the Gulf and US interests in reply to any military strike.
Mr Barak's remarks did not depart from previously stated Israeli policy, but speculation that Israel - which fears Iran is seeking to build atomic weapons - could bomb Iranian nuclear installations has mounted since a big Israeli air drill in June.
Iran has said it is enriching uranium as part of a programme to generate electricity. US leaders have not ruled out military options if diplomacy fails to end the nuclear row.
Israeli Prime Minister Ehud Olmert said in a speech in Washington last month that "the Iranian threat must be stopped by all possible means." He also called at the time for stronger international sanctions on Iran.
Iran tested more missiles in the Gulf today as the United States pledged to defend its allies against any Iranian aggression.
Washington said after Iran test fired nine missiles yesterday that Tehran should halt further missile tests if it wanted to gain the world's trust. Iran said the missiles could hit Israeli and US bases.
US Secretary of State Condoleezza Rice said on a visit to the former Soviet republic of Georgia that Washington was sending a message to Iran that it would defend American interests and those of its allies.
"We take very, very strongly our obligation to help our allies defend themselves and no one should be confused about that," Ms Rice said after meeting Georgian President Mikheil Saakashvili. Yesterday's tests rattled global oil markets, pushing up the price of oil.