ISRAEL and Iran traded threats after Ehud Olmert arrived in the United States for talks with President Bush yesterday, warning Tehran that it should “start to fear” the consequences of trying to acquire nuclear weapons.

Iran responded swiftly that it would retaliate if attacked, escalating rhetoric over the issue that is likely to dominate talks between the Israeli Prime Minister and US President alongside continuing Israeli-Palestinian violence. Mr Olmert has said that the nuclear ambitions of Iran would be the main item on his agenda when he met US officials in Washington.

He was scheduled to meet Condoleezza Rice, the Secretary of State, yesterday and Mr Bush today.

Before the talks, Mr Olmert delivered a stark warning to Mahmoud Ahmadinejad, the Iranian President, calling him “a man who is ready to commit crimes against humanity, and . . . has to be stopped.”

He told Newsweek magazine that he would support any deal under which Iran stopped short of crossing the technological threshold into full nuclear capability. He added: “But I don’t believe that Iran will accept such compromise unless they have good reason to fear the consequences of not reaching a compromise. In other words, Iran must start to fear.”

Israeli officials have hinted that the Jewish state may try to halt the Iranian nuclear programme, as it did in 1981 by bombing the Osirak nuclear reactor in Iraq in order to destroy the atomic weapons programme of Saddam Hussein.

This prompted an immediate reply from Iran. Muhammad Ali Hosseini, a Foreign Ministry spokesman in Tehran, said: “If the Zionist regime commits such stupidity, the response by the Iranian Revolutionary Guard will be swift, strong and crushing. Iran will take no longer than a second to respond.”

On the Palestinian front, Mr Olmert has backed away from his original plan to withdraw from isolated West Bank Jewish settlements in return for annexing larger ones near Tel Aviv and Jerusulem.

Admitting that he had had “second thoughts”, Mr Olmert said: “It is definitely not dead but it has to be re-examined. One thing I can promise: under no circumstances am I going to withdraw from the need to engage in a serious dialogue with the Palestinians.”

Hopes for progress on the stalled Middle East peace process rest on expectations that the two war-damaged leaders need a breakthrough to counter their own domestic political difficulties.

Mr Olmert, whose approval ratings are about 20 per cent, has been weakened by fierce domestic criticism of the Israeli conduct of its war in Lebanon, which yesterday led to the resignation of Gal Hirsch, a senior Israeli general. Udi Adam, who headed the Northern Command but was sidelined during the conflict, quit in September.

Mr Bush, whose approval ratings are little better, at slightly more than 30 per cent, saw Republicans thrown out of power in midterm elections from both houses of Congress. One acerbic Israeli commentator deemed today’s talks a meeting between “two empty suits”.

Tony Blair, a third leader whose support at home has been undermined by war overseas, has promised to dedicate his remaining months in office to fostering peace between Palestinians and Israelis. In his Guildhall speech tonight, the Prime Minister will say that Iraq cannot be seen in isolation. He will argue for a “whole” Middle East strategy that addresses all the problems of the region, including Palestine and Lebanon, where yesterday five Shia ministers, including two from Hezbollah, resigned from the Cabinet, plunging the country into renewed political crisis.

Syria and Iran, Mr Blair will say, should be given the chance to come in from the cold and help the peaceful development of the Middle East while also being warned of the consequences of not doing so.

Arab League foreign ministers meeting in Cairo yesterday called for a fresh international peace conference to resolve the Israeli-Palestinian deadlock.

They also pledged to break economic sanctions imposed by the international community on the Palestine Authority after the Islamist Hamas won elections in January.

Israeli analysts have predicted that America will urge Israel to restart negotiations with Mahmoud Abbas if the Palestinian President forges an elusive unity government with Hamas. But the US Administration is thought to be sceptical about the prospects for success, much to the frustration of British diplomats, who believe that Mr Bush appears to take scant interest in the subject.

A Democrat-controlled Congress is unlikely to challenge the pro-Israel orthodoxy of American politics which, on Saturday, led to the US vetoing a United Nations resolution condemning a military offensive in the Gaza strip.

Josh Bolten, the White House Chief of Staff, acknowledged yesterday that the Israeli-Palestinian conflict would continue to be a source of tension in Iraq and throughout the Middle East. But he suggested that any new initiative was still some way off.

Times Recommends

• Should Knox’s trial even have reached the courtroom?
• 'Was it real?' The US bailout nightmare
• Iranian opposition plays the long game