Amid growing fears that the Iranians are intent on acquiring an “Islamic bomb”, Merkel warned that the world must not repeat the mistakes it made in appeasing the Nazis.

“Looking back to German history in the early 1930s when National Socialism was on the rise, there were many outside Germany who said, ‘It’s only rhetoric — don’t get excited’,” Merkel told an international security conference in Munich.

“There were times when people could have reacted differently and, in my view, Germany is obliged to do something at the early stages,” she added. “We want to, we must prevent Iran from developing its nuclear programme.”

Merkel issued a blunt warning to Ahmadinejad, who has called for Israel to be “wiped off the map”.

“Iran has blatantly crossed the red line,” she said. “I say it as a German chancellor. A president who questions Israel’s right to exist, a president who denies the Holocaust cannot expect to receive any tolerance from Germany.”

The statement came as the International Atomic Energy Agency (IAEA), the United Nations nuclear watchdog, voted overwhelmingly in Vienna to report Iran to the UN Security Council, expressing doubts that the country’s nuclear programme “is exclusively for peaceful purposes”.

Iran responded by announcing that it would resume “commercial-scale” enrichment of uranium, the fuel for power plants or bombs, which was suspended in 2004. Ahmadinejad later ordered an end to spot checks by IAEA inspectors from today.

Tehran described as “dead” a compromise brokered by the Kremlin under which Russia would enrich uranium for Iran to the purity required for nuclear power but not weapons. Moscow insisted the deal was still on the table.

Ali Asghar Soltanieh, Iran’s ambassador to the IAEA described the vote — carried by 27 to three, with five abstentions — as a “historic mistake” and insisted his country would press on with its nuclear programme.

“We don’t want confrontation but we can tolerate some problems for the sake of principles that we are committed to,” he told The Sunday Times.

Soltanieh said it was not clear when enrichment would begin. In an apparent sign of confusion in Tehran an Iranian news agency which had said Ahmadinejad had given the order to start, immediately withdrew its report last night.

The escalation in the stand-off with Iran, the world’s fourth largest oil producer, seemed certain to drive energy prices higher on the markets tomorrow.

It will also raise fears that Tehran might respond by increasing support for militant Islamic groups in the Middle East, of which it is already a major financial backer.

Donald Rumsfeld, the American defence secretary, backed the German leader’s call for tougher action and accused Iran of being “the world’s leading state sponsor of terrorism”.

Mostafa Mohammad-Najjar, his Iranian counterpart, rejected the charges as “ridiculous”.

It nevertheless postponed discussion of the issue at the Security Council until next month to give Iran a last chance to climb down. But the vehemence of Tehran’s initial reaction made this look unlikely.

It will now be up to the Security Council to decide what further action to take. It is expected to start by making a so-called “presidential statement” reinforcing the IAEA’s demands.

Diplomats said any tougher action, such as sanctions, were further down the line and would depend on Iran’s behaviour. China, a permanent member of the Security Council, opposes sanctions.

Calls for stronger measures were growing last night, however. At the Munich conference, the influential American senator John McCain said the military option could not be ruled out if diplomatic efforts failed to stop Iran acquiring a nuclear bomb. “Every option must remain on the table,” he said. “There’s only one thing worse than military action, that is a nuclear armed Iran.”

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