"At the end of the day, it shows that Iran will pay a very heavy price if it continues with its plans to try and enrich its fuel in order to be able to use it as an option to make non-conventional weapons," said Olmert at the start of the weekly cabinet meeting.

He also said that Israel had played an important role in what he described as an intensive and stormy diplomatic effort leading to Iran's referral to the UN Security Council.

Olmert's warning came shortly after Iran announced that it had ended all voluntary cooperative measures with the International Atomic Energy Agency (IAEA), including snap checks of its nuclear sites and suspension of uranium enrichment.

The IAEA, the UN's nuclear watchdog, decided on Monday to report Iran's nuclear program to the Security Council, which might lead to sanctions.

Israel, believed to be the only nuclear power in the Mideast region, has accused Iran of secretly developing nuclear weapons under a civilian front, a charge categorically denied by Iran.