US President George W. Bush has said diplomacy aimed at halting Iran 's nuclear program has only just begun and a top aide said the world must prepare to impose targeted sanctions on Tehran.
While Bush reaffirmed his commitment to a peaceful resolution of the nuclear dispute, he told reporters at the White House Iran 's "intransigence is unacceptable".
He spoke after a report by the UN's International Atomic Energy Agency said Tehran had ignored a UN Security Council call to suspend all nuclear fuel enrichment and had accelerated the program.
Although Mr Bush in the past has not ruled out military options, he stressed that "diplomatic options are just beginning" and said Washington would continue to consult with its allies on the issue.
In an interview with Reuters, Undersecretary of State Nicholas Burns said the IAEA report proved Iran is an "international outlaw" and countries should prepare to impose targeted sanctions, either by UN Security Council action or, if necessary, outside that process.
"Countries that have economic relations that give some leverage over Iran , including exports of dual use technology and arms sales ought to shut them down. ... We hope there will be a major international reassessment of doing business with Iran as major powers decide the way forward," he said.
The United States has maintained broad sanctions on Iran since the 1979 revolution but officials are considering additional steps, such a freeze of Iranian financial assets.
Iranian President Mahmoud Ahmadinejad, speaking before the IAEA report, said Tehran would not back down from its nuclear program. Iran insists the program is for producing energy but Western powers say it is a cover for developing weapons.