President Bush issued a swift reminder yesterday that he was still willing, if necessary, to use America's military might against Iran, as he sought to prod a reluctant German Chancellor into supporting tougher sanctions and severing economic ties with the Islamic Republic.

At a press conference with Angela Merkel, Mr Bush twice stated that “all options are on the table” in punishing Iran's defiance over its nuclear ambitions — “and the choice is theirs to make”.

His warning came less than 24 hours after publication of his interview with The Times in which he expressed regret for using language that convinced much of the world he was “really anxious for war” in Iraq and Afghanistan.

Although he said yesterday “we want to solve this issue peacefully”, Mr Bush is frustrated by the slow pace of progress in securing more draconian United Nations sanctions against Iran. His remark about keeping all options on the table, while lacking the bellicosity of statements made in his first term, signals that military action is one route he could take.

Mr Bush is waiting to see how Iran reacts to the offer of diplomatic and economic rewards if it agrees to obey UN resolutions demanding that it halt a uranium-enrichment programme that the West fears will be used to build a nuclear bomb. “We'll see what choice they make,” he said. “We'll give diplomacy a chance to work.”

Yesterday President Ahmadinejad of Iran gave little reason to suppose that it would. He declared that his country would never be forced to suspend enrichment activities, saying: “They think they can trample on the Iranian nation's dignity with such things.” Mr Bush said that if Tehran continued “to be obstinate” there must be “additional sanctions”. On Tuesday, at an EU-US summit in Slovenia, European leaders promised that they would consider taking their own action — regardless of discussions at the United Nations Security Council — against Iran's banking and financial system.

White House officials travelling with the President complained however that several European countries, including Germany, have failed to implement even the measures already agreed by the UN.

Stephen Hadley, Mr Bush's National Security Adviser, said there had been some reluctance in Europe on the issue. He emphasised that if Iran rejected the latest offer then “we need to turn up the pressure” and “get much more aggressive” in fulfilling earlier commitments.

Mrs Merkel delighted the White House by backing possible EU action, as well as promising to order German banks to disentangle themselves from Tehran. “If Iran does not meet its commitments further sanctions will have to follow,” she said.

She added that any such measures would be most effective if they were agreed by the UN Security Council. Diplomats see this last comment as code for delay. “Anything which involves the UN inevitably takes longer,” said one, “and Bush - in his final six months - does not have a lot of time to play with.” Germany has cut back trade with Iran, with the value of exports shrinking to $5 billion last year from $6.8 billion in 2006. Washington is impatient for more.

European business leaders say that it is easy for America to call for tough sanctions because the US has had no economic relationship with Iran since the hostage crisis 30 years ago.

Britain and France, the other members of the “EU3” leading negotiations with Iran, have adopted a tougher stance towards Iran. President Sarkozy of France has been particularly aggressive in calling on energy companies such as Total not to invest in Iran.

A spokesman for Downing Street, where Gordon Brown will play host to Mr Bush on Sunday, said: “None of us wants to blow the UN route out of the water; it has not reached its natural conclusion.”

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