Bush threatened Iran with "serious consequences" if it attacked US warships, saying "all options" were on the table to protect US assets after Sunday's standoff in the strategic Strait of Hormuz.

Speaking in Jerusalem after talks with Israeli leaders, Bush also said that he remained convinced like them that Iran's nuclear programme made it a threat to world peace, despite a recent US intelligent report that said Tehran abandoned an atomic weapons drive in 2003.

"All options are on the table to protect our assets," Bush said when asked about the confrontation between US and Iranian vessels.

"We have made it clear publicly and they know our position and that is that there will be serious consequences if they attack our ships, pure and simple. My advice to them is don't do it."

Tehran and Washington have given sharply differing accounts of what transpired between their navies in the key waterway for world energy supplies, with an Iranian commander accusing the Pentagon of "clumsily" fabricating video footage claiming to show Iranian speedboats harassing US ships.

"The pictures that the Pentagon broadcast of the naval incident are file pictures and the voices have all been fabricated," the Fars news agency quoted a senior commander in the Revolutionary Guards as saying.

The Pentagon released a video and audio tape on Tuesday that it said confirmed US charges that Iranian speedboats swarmed around US warships in the Strait of Hormuz on Sunday and radioed a threat to blow them up.

"The voices and pictures broadcast by the Pentagon about the latest incident have been fabricated so clumsily that the pictures and voices in the video are not even synchronized," the Guards commander said.

"That fact that it is a fake is clear to all."

The Iranian accusation drew short shrift from the Pentagon which said it was "absurd and factually incorrect and reflects a lack of seriousness with which they take this serious incident."

The video, which the Pentagon said was taken from the bridge of the destroyer USS Hopper, showed boats approaching the warships at high speeds and racing around the Hopper, the USS Port Royal and the USS Ingraham.

A man's voice is heard in an audio recording speaking in English amid a sailor's urgent warnings to stay clear of the ship.

"I am coming to you... You will explode in a few minutes," the voice is heard to say.

Iranian officials had already dismissed the US version of the incident as anti-Iran propaganda ahead of Bush's visit to the Middle East, saying what happened was an everyday occurrence.

The Revolutionary Guards, Iran's elite military unit, has said that its naval forces merely identified the US vessels before both sides went on their way without any disturbance.

The war of words has been music to the ears of Israeli leaders who regard Iran as their main enemy after repeated calls from President Mahmoud Ahmadinejad for the Jewish state to be wiped off the map.

"We take your advice to not underestimate the Iranian threat. Iran should not underestimate our resolve for self defence," said Israeli President Shimon Peres as he welcomed Bush.

Israel had been dismayed by the new US intelligence assessment released early last month which concluded that Washington's allegations about Tehran's atomic goals had been overblown for at least two years.

The report -- the consensus view of all 16 spy agencies -- dealt a blow to US and Israeli calls for the UN Security Council to impose a third set of sanctions over Iran's failure to heed ultimatums to suspend uranium enrichment.

But after talks with Israeli Prime Minister Ehud Olmert, Bush took his distance from the assessment.

"Iran was a threat, Iran is a threat and Iran will be threat to world peace if the international community does not come together and prevent that nation from the development of the know-how to build a nuclear weapon," he said.

"A country that once had a secret programme can easily restart a secret programme," he added.

Israel is widely considered the Middle East's sole if undeclared nuclear power and its leaders have made preventing Iran acquiring an atomic bomb their top strategic priority.

earlier related report
Iran, IAEA close new chapter in nuclear talks
Iran and the UN nuclear watchdog have wrapped up the latest chapter in ongoing talks aimed at resolving ambiguities over the contested Iranian nuclear programme, the ISNA news agency reported Wednesday.

"Over the last few days, Iranian officials and International Atomic Energy Agency (IAEA) experts carried out their final discussions about the source of contamination," an unnamed official told the agency.

"These negotiations ended Tuesday and the IAEA experts returned to Vienna on Wednesday," the official added.

The talks come ahead of a rare visit to Tehran by IAEA chief Mohamed ElBaradei on Friday and Saturday aimed at resolving outstanding questions over the Iranian nuclear programme.

The talks are believed to have centred on uranium particle contamination found in the past by UN inspectors at the technical college of Tehran University.

The two sides have already held discussions about Iran's past experiments with plutonium and its use of uranium-enriching P1 and P2 centrifuges. The uranium contamination represents the latest chapter to be opened in the talks.

The talks are in line with a timetable agreed by both sides in August for Tehran to provide more information over various areas of ambiguity in its nuclear programme.

Despite four years of investigation, the IAEA has never been able to confirm if the drive is peaceful.

A report published in December by the US intelligence community said Iran had halted a nuclear weapons drive in 2003. Iran insists its atomic programme has always been peaceful.

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