Israel tested a missile on Thursday, prompting Iran to vow retaliation if the Jewish state carried out recent veiled threats to launch strikes, possibly atomic, against Tehran's nuclear facilities.

Israel is widely assumed to have nuclear warheads and missiles able to hit Iran. It gave no details of the trial. A defence official said it was "not just flexing its muscles", three days after Prime Minister Ehud Olmert pledged to consider "all options" to prevent Iran building nuclear weapons.

As oil prices rose almost 1 percent on the new Middle East tension, Iranian President Mahmoud Ahmadinejad, who says his country wants only atomic energy, said Israel would hold off: "The Zionist regime ... would not dare attack Iran," he said.

"The Iranian response would make them regret it. They know this," he told Al Jazeera in remarks translated into Arabic.

Israeli Foreign Minister Tzipi Livni urged the West to work harder to prevent "the appearance of a nuclear Iran", a message Olmert and his team rammed home to George W. Bush when the U.S. president visited Jerusalem a week ago on a regional tour aimed partly at rallying Arab states against Tehran.

Israel, Washington's closest Middle East ally, says Iran could have a bomb by 2010 that would threaten its existence. Iran has also carried out tests of long-range missiles.

Israel was dismayed by a recent U.S. intelligence report that said Tehran halted its nuclear weapons programme in 2003. The report fuelled speculation Israel might attack Iran on its own if U.S. public opinion prevented Bush from doing so.

Israel bombed a site in Syria in September, an attack that recalled its 1981 strike on Saddam Hussein's Iraqi nuclear reactor. But many analysts say Olmert's political weakness makes a pre-emptive, unilateral attack on Iran unlikely.

Israel's Defence Ministry said: "A successful missile launch was carried out within the framework of examining rocket propulsion." It gave no other details and one former official in Israeli missile defence said the timing might be coincidence.

Israel Radio said the missile tested was able to carry an "unconventional payload" - an apparent reference to the nuclear warheads Israel is assumed to possess.

Israel Radio, which operates under military censorship, quoted unidentified foreign reports as saying Israel was developing a long-range surface-to-surface missile, Jericho III.

Amateur photographs posted on Israeli news Web sites showed a white plume in the sky above central Israel - suggesting a test of a large missile rather than of smaller, anti-missile defensive rockets that Israel is also believed to be developing.

Analysts say that Israel's Jericho II missile, based on a rocket it uses to launch satellites into space, can take nuclear warheads and has long had a range of at least 1,300 km (800 miles) - enough to reach Tehran. Defence experts said Israel is probably trying to improve its missiles' range and accuracy.

The United Nations Security Council has imposed two rounds of sanctions on Iran for its refusal to halt uranium enrichment - a process that can be used for both electricity and bombs.

But the five permanent members of the Security Council - the United States, Russia, China, France and Britain - and Germany are split over how to proceed after the U.S. estimate that said Tehran halted nuclear weapons efforts four years ago.

Foreign ministers from the six countries will meet in Berlin on Tuesday to debate Iran strategy.

"There are open questions Iran urgently needs to resolve to re-establish lost trust," German Foreign Minister Frank-Walter Steinmeier told reporters in Vienna before meeting head of the U.N. nuclear watchdog Mohamed ElBaradei.

Israel's Livni said in Moscow that Russia's first shipment of nuclear fuel to Iran's first power plant in Bushehr "may serve military goals". Livni said sanctions had put "certain pressure" on Tehran, but their effect "has not been critical".

"Those taking decisions on Iran are being watched by everyone in our region," she said. "We expect the world will not allow the appearance of a nuclear Iran."

But Russia and China appear reluctant to support a third round of sanctions on Iran after the U.S. report.

China hinted at continued distaste for steps to isolate Iran, a major source of oil for Beijing.

"We hope Iran will be able to abide by the relevant Security Council resolutions (demanding an enrichment halt) and continue to show flexibility and fully cooperate with the international community," Chinese Foreign Ministry spokeswoman Jiang Yu said.

Iran's top nuclear negotiator Saeed Jalili is in Beijing for talks and U.S. Deputy Secretary of State John Negroponte is also visiting China for discussions that will feature Iran.