Remarks by Shaul Mofaz, the defence minister, raised the temperature of the worsening international crisis over the Islamic republic's nuclear ambitions and prompted Iran into a swift and strongly-worded response.

The war of words increased the prospect of another pre-emptive strike by Israel similar to that in 1981 when its warplanes destroyed Saddam Hussein's nuclear programme with an attack on the Osirak reactor in Iraq.

Mr Mofaz was reacting to the decision by Iran to restart its uranium enrichment programme earlier this month after a two and a half year moratorium, which prompted European powers to draft a resolution calling for Iran's referral to the UN Security Council.

"We are giving priority at this stage to diplomatic action … but we cannot tolerate a nuclear option for Iran and we must prepare ourselves," Mr Mofaz said. "We must develop the option of our defence with all that implies."

He then issued a rhetorical plea to the Iranian leader.

"You, who are leading your country in an ideology of hatred, terror and anti-Semitism, you had better take a glance at history and see what became of tyrants like you who tried to annihilate the Jewish people," he said.

"They brought only destruction upon their own people."

Mr Mofaz nevertheless added: "Israel's policy is to bring this hot potato to the Security Council to impose sanctions and invasive inspection."

His sentiments were echoed in remarks from Gen Dan Halutz, head of the Israeli armed forces.

Questioned about how Israel's defence establishment was preparing itself for the challenge posed by Iran, Gen Halutz said: "I am not going to deal with the solutions to the Iranian nuclear problem. Israel is not helpless - that is enough of an answer."

Iran offered a swift retort from its foreign ministry spokesman, who said any attack on Iran would be a "fatal mistake". "This is just a childish game by Israel," said Hamid Reza Asefi.

His threats were not limited to Israel. Saying dialogue was the best way to settle the dispute, he issued a harsh warning to European powers to resume talks.

"We advise them [Europe] not to choose any path except dialogue. If there is a retribution to be paid, that will include Europe, too," Mr Asefi said, adding that Iran planned to continue co-operation with the UN.

Relations between Israel and Iran have been hostile since the 1979 Iranian revolution but they worsened considerably last year when the newly-elected Iranian president, Mahmoud Ahmadinejad, called for Israel to be "wiped off the map".

Israel has had its own nuclear arsenal since the 1980s although details remain a closely guarded secret. Government policy is neither to confirm nor deny the existence of its nuclear capability.