Israel could bolster the international campaign to head off Iran's nuclear programme by pursuing peace with the Palestinians, Britain said on Sunday.

The remarks by Defence Secretary Liam Fox ran counter to arguments by Israel, whose negotiations with the Palestinians stalled last year in a dispute over West Bank settlements, that Palestine talks hinged on first curbing its Iranian arch-foe. "The United Kingdom is pushing for stronger sanctions to influence Iran, but the importance of the Middle East peace process should not be overlooked," Fox told the Herzliya Conference, an annual Israeli security forum. "Progress towards a two-state solution -- a secure and universally recognised Israel alongside a viable and contiguous Palestinian state -- is important for defusing the malign political influence of Iran in the region."

Britain and other world powers held unsuccessful talks in Istanbul last month with Iran, which denies seeking the bomb. Calling the prospect of the Iranians' sometimes secretive uranium enrichment project yielding warheads a "disaster", Fox said: "We want a negotiated solution. But Iran needs to change its approach fundamentally if we are to achieve that outcome ... We will not look away, and we will not back down."

He added a warning that appeared aimed at Turkey, which has balked at sanctions and championed accommodation with Tehran. The United States has also scrutinised Gulf Arabs suspected of serving as intermediaries for Iranian foreign trade.

"For sanctions to work, regional powers and neighbours need to make sure they are not used by Iran to help it avoid or water down the impact of economic sanctions," Fox said.

"Those who allow Iran to avoid the effect of sanctions are themselves an obstacle to the peaceful resolution of the Iran problem."

Fox linked the malaise in Israeli-Palestinian engagement, and wider regional conflicts, to Britain's national security.

"What happens here can have a direct impact on the national security of the United Kingdom -- our prosperity and the safety of our citizens," he said. "Threats originating in one part of the globe can become threats in all parts of the globe."

Fox said Britain's Conservative-led government acknowledged that Israel, whose own nuclear capabilities are undeclared, had a "unique set of security concerns". He offered praise for its military know-how that seemed to part with past British censure of Israeli crackdowns on the Palestinians. London had at times imposed limited arms embargoes against Israel in response.

"We enjoy a strong bilateral defence relationship with Israel. This is a relationship that, thankfully, is growing and maturing. It is a relationship that enables our operations, and in some cases, keeps British troops alive in Afghanistan," he said.