"We know that they are concerned about the impact of the sanctions. The sanctions are biting more deeply than they anticipated and we are working very hard at this," Gates told reporters on a visit to Australia for security talks.

"So I would disagree that only a credible military threat can get Iran to take the actions it needs to to end its nuclear weapons programme.

"We are prepared to do what is necessary but at this point we continue to believe that the political-economic approach that we taking is in fact having an impact in Iran."

Israeli Prime Minister Benjamin Netanyahu told US Vice President Joe Biden on Sunday that only a "credible" threat of military action would stop Iran from developing the atomic bomb, a senior Israeli official said.

The official, who asked not to be named, quoted Netayahu as telling Biden: "The only way to ensure Iran does not obtain nuclear weapons is by creating a credible threat of military action against it if it does not halt its race to acquire a nuclear bomb."

President Barack Obama's administration, while not ruling out a military option against Iran, has so far stressed sanctions and diplomacy as its preferred course with dealing with the Islamic republic's nuclear drive.

Biden's discussions with Netanyahu in New Orleans come as world powers are positioning for a resumption of talks with Iran about its nuclear programme, which the West suspects is aimed at developing a nuclear weapons capability.

And it comes on the heels of US mid-term elections that left Obama in a weakened position with Republicans in control of the House of Representatives and the Democrats clinging to a slender majority in the Senate.

Republican Senator Lindsey Graham set a tough tone on Saturday at a security conference in Ottawa when he said conservatives want "bold" action on Iran.

If Obama "decides to be tough with Iran beyond sanctions, I think he is going to feel a lot of Republican support for the idea that we cannot let Iran develop a nuclear weapon," Graham told the Halifax International Security Forum.

"The last thing America wants is another military conflict, but the last thing the world needs is a nuclear-armed Iran... containment is off the table."

Netanyahu's spokesman Mark Regev said the Israeli prime minister expressed support for continued sanctions on Iran in his talks with Biden but suggested that more pressure was needed.

"Sanctions are important. They are increasing pressure on Iran. But so far there has not been any change in the behaviour of Iran and upgrading of international pressure is necessary," he quoted Netanyahu as tell Biden.

The impasse over Iran's nuclear activities has already led to fresh UN and EU sanctions against Tehran, which were followed by several other unilateral punitive measures by the United States and the European Union.

Sanctions notably ban investments in oil, gas and petrochemicals while also targeting banks, insurance, financial transactions and shipping -- which Tehran has brushed off as having no impact.

But Iran -- which denies seeking nuclear weapons -- has said it is prepared to resume talks from November 10 and proposed that they be held in Turkey rather than Vienna, the site proposed by EU foreign policy chief Catherine Ashton.

The talks, which include Britain, China, France, Russia, Germany and the United States, have been deadlocked since October 2009 when the two sides met in Geneva.

The New York Times reported last month that the Obama administration and its European allies were preparing a new, more onerous offer for Iran than the one rejected by supreme leader Ayatollah Ali Khamenei last year.

The offer would require Iran to send more than 4,400 pounds of (1,995 kilograms) of low-enriched uranium out of the country, an increase of more than two-thirds from the amount required under a deal struck in Vienna.

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