Iran has enough fissile material to build one nuclear bomb, the chairman of the US joint chiefs of staff said yesterday, underlining the gravity of the toughest foreign policy issue facing the Obama administration.

Admiral Mike Mullen told CNN that a nuclear-armed Iran would be a "very, very bad outcome", apparently confirming a report by the UN's nuclear watchdog that its uranium enrichment was more advanced than previously thought.

It was the first such public assessment of Iran's nuclear capability by the US, though there was no indication whether it was based on independent intelligence.

Mullen's remarks came after a report two weeks ago by the International Atomic Energy Agency (IAEA), that said Tehran had made significant advances in enrichment. It claimed an increase in Iran's reported stockpile of low-enriched uranium at its Natanz plant since last November to 1,010 kg - technically enough, say some physicists, for conversion into high-enriched uranium for one bomb.

Asked if Iran had enough material to manufacture a bomb, Mullen said yesterday: "We think they do, quite frankly. Iran having a nuclear weapon, I believe, for a long time, is a very, very bad outcome for the region and for the world."

Iran insists it does not intend to build nuclear weapons but is pursuing its legitimate right to process uranium for power plants like the one at Bushehr on the Persian Gulf coast that was fired up in a trial run last week.

Israel, which has its own undeclared nuclear weapons arsenal, has been warning for some time that Iran is far closer than believed in the west to being able to build a bomb.

President Obama has repeatedly signalled that he wants diplomatic engagement with Tehran to defuse the "urgent problem" of the nuclear dispute. But he has also hinted at tougher sanctions if Iran does not meet international demands. He and Gordon Brown will discuss Iran in Washington this week.

Assessing Iran's nuclear ambitions has a troubled history in the US. In 2007 a National Intelligence Estimate concluded Iran had halted its programme in 2003. But that was widely questioned. And even if true, there is no guarantee it has not restarted since.

Robert Gates, the US defence secretary, said separately yesterday that Iran was "not close" to obtaining a weapon.

"I think that there has been a continuing focus on how do you get the Iranians to walk away from a nuclear weapons programme. They're not close to a stockpile. They're not close to a weapon at this point," he told NBC.

IAEA delegates are to discuss Iran at a meeting in Vienna today amid concern that it has been curbing inspections and making it harder to uncover any secret facilities.