Ending a one-day European Union summit, the Prime Minister called the explosive declaration by Mahmoud Ahmadinejad on Wednesday a disgrace. Promising discussions with Washington and other allies over how to react, Mr Blair said that he had often been urged not to take action against Iran.

But he added: “If they carry on like this the question people will be asking us is — when are you going to do something about Iran? Can you imagine a State like that with an attitude like that having nuclear weapons?”

It was the first time Mr Blair had even hinted at military action and his words are likely to alarm Labour MPs. Mr Blair, clearly angry at the President’s outburst, said that there were people in Iran’s leadership who believed that the world was sufficiently distracted that it could not afford to focus on the nuclear arms issue.

“They will be making a very big mistake if they do that. Those sentiments are completely unacceptable,” he said. “I have never come across a situation in which the president of a country has said they want to wipe out another country. That is unacceptable.”

Mr Ahmadinejad’s words triggered international condemnation, with Israel demanding Iran’s expulsion from the United Nations. “A country that calls for the destruction of another people cannot be a member,” Ariel Sharon, the Israeli Prime Minister, said.

Russia, which has been helping Iran to develop its nuclear programme, called the words unacceptable. Kofi Annan, the UN Secretary-General, expressed dismay. The Bush Administration demanded that Iran behave as a responsible member of the international community.

Unlike the US, the EU has always emphasised the need to engage Iran diplomatically, but it also abandoned its more cautious stance yesterday. “Calls for violence and for the destruction of any state are manifestly inconsistent with any claim to be a mature and responsible member of the international community,” the leaders said in an agreed statement.

Iran’s chargé d’affaires in London was called to the Foreign and Commonwealth Office to be told of Britain’s outrage. Iranian diplomats were subjected to similar protests in other capitals.

Mr Blair said of Iran: “Their attitude towards Israel, terrorism and nuclear weapons is not acceptable. If they continue down this path people are going to believe that they are a real threat to world security and stability. I feel a real sense of revulsion. It shows how much some of these places need to reform themselves. How can we build a more secure world with that type of attitude? It is a disgrace.”

The EU leaders said that the President’s comments would cause concern about Iran’s role in the region and its future intentions. That his comments were made on the same day as the attack on Israeli civilians at Hadera only reinforces the lesson that incitement to violence, and the terrorism it breeds, were “despicable and unacceptable acts”, they said.

Britain, France and Germany have been responsible for handling the EU’s relations with Iran in international forums, and have been notably careful in their diplomatic language, particularly in reference to the prospect of any military action against Iran. By contrast, Washington has conspicuously refused to rule out such action.

But fears in Western governments have grown since the removal last June of Mr Ahmadinejad’s predecessor, Mohammad Khatami, who had been much less hostile to Israel and of whom both Tony Blair and Jack Straw, the Foreign Secretary, had hopes of a better relationship. His successor, the former mayor of Tehran, was an unknown quantity to the West. On Wednesday he made his hardline views clear when he cited the founder of Iran’s Islamic revolution, Ayatollah Ruhollah Khomeini: “As the Imam said, Israel must be wiped off the map.”

Fears about Iran’s nuclear ambitions have been augmented by worries about its activities in Iraq, where it has been suspected of supporting insurgents. There have been reports that high-ranking members of al-Qaeda have been allowed to roam freely in Iran. Tehran has denied any link to or support for the terrorist group.

WHAT THE PRESIDENT SAID

‘Anybody who recognises Israel will burn in the fire of the Islamic nation’s fury [while] any [Islamic leader] who recognises the Zionist regime means he is acknowledging the surrender and defeat of the Islamic world . . . As the Imam said, Israel must be wiped off the map’

President Ahmadinejad

Times Recommends

• The truth behind Obama's meteoric ascent
• Christians flee Iraq amid religious cleansing
• Aid agencies: 5m face starvation in Zimbabwe