British Foreign Secretary William Hague on Sunday warned that Iran's nuclear programme could spark a Middle East arms race, and that all options to deal with the threat were being considered.
In an interview with the Sunday Telegraph, Hague called on the Iranian regime to enter negotiations or face tougher sanctions.
European governments are moving closer to an agreement on an Iranian oil embargo that would give companies six months to phase out contracts with Tehran.
"We do have to confront this problem, because Iran has embarked on a course which threatens the whole region of the Middle East with nuclear proliferation," Hague told the Telegraph.
"It is an intensifying problem that we have over their nuclear programme," he added. "And so there is a risk that this will become a greater crisis as 2012 goes on."
Iran insists its nuclear programme is for exclusively peaceful purposes.
But most Western countries believe it masks a drive to develop nuclear weapons -- a suspicion strengthened though not confirmed by a November report by the International Atomic Energy Agency.
Hague vowed "stronger and stronger" sanctions until Iran agreed to negotiate but cautioned against becoming "starry-eyed" about the effectiveness of economic restrictions.
The minister said Britain was not contemplating imminent military action against Iran, but stressed it would not "take any options off the table in the long term."