European Union foreign ministers threatened Monday to tighten sanctions on Iran over its controversial nuclear drive but showed little appetite for military action.

French Foreign Minister Alain Juppe warned after talks with European Union counterparts that a military intervention "would be the worst thing and it would drag us into an uncontrollable spiral."

German Foreign Minister Guido Westerwelle said too that military action would be "counter-productive."

But amid heightened tensions following a UN atomic agency report on the nature of Iran's nuclear goals, British Foreign Secretary William Hague said all options should remain on the table.

Asked to comment on talk of a strike against Iran, Hague said: "We are not considering that at the moment. We are not calling for or advocating military action.

"At the same time we say all options should remain on the table."

Dutch Foreign Minister Uri Rosenthal, when asked about possible military action, also said: "I don't exclude any options."

In a statement, the 27 EU ministers voiced "increasing concerns" over Tehran's programme and the lack of progress on the diplomatic front, a week after the International Atomic Energy Agency cited "credible" intelligence suggesting Iran carried out work towards building nuclear warheads.

"We urge Iran to address the international concerns over the nature of its nuclear programme through full cooperation with the IAEA and by demonstrating readiness to engage seriously in concrete discussions on confidence-building steps," the ministers said.

Warning that Iran was in breach of international obligations, the ministers said that they would "examine possible new and reinforced measures" when they are next due to meet next month.

"It is clear that the IAEA report shows that Iran is making progress in its project to build a nuclear weapon. It is a major danger for the stability if the region and the world," Juppe said.

The French minister mistakenly told reporters the EU would ask the European Investment Bank to freeze loans to Iran. His entourage later said Juppe had confused Iran with Syria. The EU had earlier agreed to impose such a sanction on Syria.

Swedish Foreign Minister Carl Bildt also opposed military action, saying "some hype" was built around last week's IAEA report.

"I don't think any military response is justified or called for. We have to solve this by diplomatic means," Bildt said.

EU foreign policy chief Catherine Ashton is representing six world powers -- Britain, China, France, Germany, Russia and the United States -- in stalled talks with Iran aimed at convincing Tehran to freeze nuclear activities.

Ashton told reporters she was still waiting for a response from Iran on her letter offering to resume talks, but that negotiations had to take place "absolutely in the spirit we proposed."