Tony Blair called on moderate Muslim states across the Middle East to unite to tackle the "forces of extremism" in Iran and counter its influence around the world.

A month after hinting at a possible partnership with Iran, Mr Blair launched his toughest assault yet on Tehran, accusing it of openly supporting terrorism in Iraq, undermining the Lebanese government and trying to acquire nuclear arms.

He said the regime of the President Mahmoud Ahmadinejad was at the heart of a "monumental struggle" between the forces of moderation and extremism around the world.

Iran has never recognised Israel and last year Mr Ahmadinejad called for Israel to be "wiped off the map".

Speaking to business leaders in Dubai, Mr Blair said: "We must recognise the strategic challenge the government of Iran poses - not its people, not possibly all of its ruling elements, but those presently in charge of its policy.

"They seek to pin us back in Lebanon, in Iraq, in Palestine. Our response should be to expose what they are doing, build the alliances to prevent it and pin them back across the whole of the region.

"To do this, we need the open and clear backing of countries in this region who know better than we what is happening and why."

He added: "We have to wake up. These forces of extremism based on a warped and wrong-headed misinterpretation of Islam aren't fighting a conventional war but they are fighting one against us - and 'us' is not just the West, still less simply America and its allies.

"'Us is all those who believe in tolerance, respect for others and liberty.

"We must mobilise our alliance of moderation in this region and outside it to defeat the extremists.

Mr Blair's spokesman denied suggestions that his comments were designed to encourage a confrontation between Sunni and Shia Muslims, saying the prime minister worked with all faiths.

His visits to Turkey, Egypt, Palestinian territories and Israel, confirmed a "startlingly real, clear and menacing" lesson, Mr Blair said. But he added that progress was made in exploring ways to revive the Israeli-Palestinian peace process.

Mr Blair is expected to hold talks with world leaders in early 2007 on delivering a package of aid for the Palestinian President Mahmoud Abbas and taking steps towards resolving other issues in the region.

During his tour, Mr Blair met Mr Abbas and the Israeli Prime Minister Ehud Olmert to discuss the peace process. He set out three priorities to restore momentum, including an early meeting with the two leaders and a relaunch of the political process leading to a two-state solution.

He also advised that an office of the president of Palestine be created and given the capacity to improve the lives of the Palestinian people.

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