Prime Minister David Cameron pledged on Monday that "nothing - and I mean nothing - is off the table if Iran makes the wrong choice."

He told more than 700 supporters of the UJIA at the charity's annual fundraising dinner that although he had warned Israel's prime minister, Benjamin Netanyahu, that "now is not the time for Israel to resort to military action," nevertheless he believed that a nuclear armed Iran was not just a threat to Israel but "a threat to the world."

Mr Cameron maintained that "a negotiated settlement remains within Iran's grasp" and insisted that the new level of sanctions - backed by Monday's resolution of the European Union Foreign Affairs Council - were beginning to have "an impact no-one expected a year ago."

Iranian oil exports had fallen by 45 per cent, the rial had plummeted by half its value, and inflation had soared to approaching 50 per cent.

"Most significantly, there are signs that the Iranian people are beginning to question the regime's strategy, with even pro-regime groups protesting at the actions of the government.

It's mind-boggling that the leaders of a nation so rich in oil have succeeded in turning their country into a banana republic desperately trying to put rockets into space while their people suffer."

Earlier Mr Cameron made a pointed intervention on behalf of Britain's ambassador to Israel, Matthew Gould, who had travelled from Tel Aviv for the event. The ambassador has been repeatedly accused of alleged "dual loyalties" as he is the UK's first Jewish envoy to the state of Israel.

Mr Cameron declared: "There is no contradiction between being a proud Jew, a committed Zionist and a loyal British citizen."

And the prime minister received huge applause when he laid down the law about boycotters. "To those in Britain's universities and trade unions who want to boycott Israel and consign it to an international ghetto, I say... we know what you are doing - trying to delegitimise the state of Israel - and we will not have it."