U.S. envoy in Israel plays down talk of Iran attack

JERUSALEM (Reuters) - The U.S. ambassador to Israel played down speculation on Thursday that an attack by either country on Iranian nuclear sites was imminent, saying the allies agreed sanctions should run their course.

"I don't think any decisions have been made on any military action by any party, that I'm aware of," Richard Jones told reporters.

"I think a lot of people believe that the use of military force would be the last option and there are plenty of other options that need to be exercised beforehand -- and I think we are in the process of exercising those options," he said.

"We are working very closely with Israel on our diplomatic efforts."

U.S. President George W. Bush on Wednesday reiterated his administration's support for giving diplomatic pressure on Tehran a chance to work, but said "all options are on the table".

Speculation about a possible strike on Iran has lifted oil prices, which hit a new record high of above $145 a barrel on Thursday. Traders said the market now had $150 within reach.

Iran, which denies seeking nuclear weapons, has defied U.N. Security Council sanctions designed to curb its access to technologies with bomb-making potential.

A large-scale Israeli air force drill last month prompted speculation that the Jewish state, which is believed to have the region's only atomic arsenal, could be preparing to attack the Islamic republic.

The Israeli government, while hinting that it considers force a viable last resort against its arch-foe, has endorsed sanctions.

(Writing by Dan Williams; Editing by Caroline Drees)