Israeli Prime Minister Ehud Olmert proposed in talks with a US Congressional leader that a naval blockade be imposed on Iran to try to curb its nuclear programme, an Israeli newspaper said.

The Haaretz daily quoted Olmert as telling Nancy Pelosi that "the present economic sanctions have exhausted themselves" and the international community needed to take more drastic steps to stop Iran's efforts to obtain nuclear weapons.

A spokesman for Olmert declined to comment on the Israeli leader's talks on Monday with Pelosi, the speaker of the US House of Representatives, in Jerusalem. "It was a confidential discussion," said the spokesman, Mark Regev.

The prime minister's suggestions, Haaretz said, included a naval blockade of Iran using U.S. warships to limit the movement of Iranian merchant vessels.

Olmert also said, according to the report, that international restrictions should be placed on Iranian aircraft, business executives and senior officials. "Iranian business people who would not be able to land anywhere in the world would pressure the regime," Haaretz quoted Olmert as saying.

On her return to Washington, Pelosi said she and the congressional delegation she led to Israel had discussed with its leaders "the threat posed by Iran".

Iran has said it will not cease uranium enrichment, which it says is for generating electricity only. Israel, widely believed to have atomic weapons, has called the Iranian nuclear programme an existential threat.

Olmert plans to visit Washington in about two weeks for talks likely to focus on Iran and US-brokered peace negotiations with the Palestinians. He has undertaken a flurry of diplomatic meetings during Israel's 60th anniversary celebrations while under criminal investigation over suspected bribe-taking, which he denies.

Regev said last week after a visit to Israel by US President George W. Bush that the United States and Israel agreed on the need for "tangible action" and "additional steps" to prevent Iran from developing nuclear arms.

Olmert has stopped short of publicly threatening to use force against Iran but has said all options are on the table.

Bush has vowed Washington would stand with Israel in opposing Iran's nuclear ambitions and said in a speech in the Israeli parliament that it would be "unforgivable" if Tehran were allowed to get the bomb.

Three rounds of limited United Nations sanctions have been imposed on Iran over its nuclear programme.