WASHINGTON (Reuters) - Iran is heading toward a major breakthrough in its nuclear program, an Israeli official said on Friday, as the White House warned Iran could face new sanctions if it ignores an international freeze offer.

Israel's Deputy Prime Minister Shaul Mofaz addresses a news conference at the Washington Institute for Near East Policy August 1, 2008. REUTERS/Jonathan Ernst

“As soon as 2010 (Iran) will have the option to reach (uranium production) at military levels,” Israeli Deputy Prime Minister Shaul Mofaz told an audience in Washington, adding that this would be an “unacceptable” development.

Oil prices rose $4 in early Friday trade after the warning by Mofaz stirred concerns of a possible attack on the OPEC nation that would disrupt supplies.

There has been speculation that either the United States or Israel could attack Iran’s nuclear facilities, though both have said force should be a last recourse.

The West accuses Iran of seeking to develop nuclear weapons under cover of a civilian energy program; Iran denies it, and Iran’s Supreme Leader Ayatollah Ali Khamenei said this week that Iran would press ahead on its nuclear path.

Western powers gave Iran two weeks from July 19 to respond to their offer to hold off on imposing more U.N. sanctions on Iran if Tehran would freeze any expansion of its nuclear work.

The White House said on Friday that “negative consequences await” if the Iranians don’t respond positively. The informal deadline is this Saturday.

“That would possibly come in the form of sanctions,” White House spokeswoman Dana Perino told reporters.

The United Nations has already imposed three rounds of sanctions on Iran.

Mofaz, a former Israeli defense minister and contender to replace outgoing Israeli Prime Minister Ehud Olmert, emphasized that any new sanctions should be imposed this year, instead of allowing the Iranians to stall for time past U.S. presidential elections in November.

“We must insist on Iran meeting the timetable set,” he said in a speech to the Washington Institute. “The red line should be that there is no uranium enrichment on Iranian soil.”

“It is a race against time and time is winning,” the Iranian-born Mofaz warned. But he also said he supported diplomacy and spoke of other options as “last resort.”

Mofaz told reporters that he had handed over to the U.S. government a list of Israeli proposals for new sanctions. These would “affect Iranian leaders and others individuals of influence, as well as the general populace.”

Asked whether there had been any discussion with the Americans of possible U.S. green lights for Israeli military action against Iran, Mofaz said: “I cannot answer the question, because it was not raised in our dialogue.”

U.S. officials say they are not sure what to expect from the Iranians this weekend, and that they would want to consult with the other major powers behind the offer about Iran’s response, or lack of it. Those countries are Russia, China, Germany, France, and Britain.

“The Iranians sent mixed messages this week and it’s really hard to tell what the bottom line is. And so we’ll just need to wait and see if they do respond formally,” Perino said.

Reuters asked Mofaz whether he worried about losing U.S. support when climbing gasoline prices were often blamed on Mideast turmoil.

“The existence of the state of Israel is more important than the price of gas or oil,” he replied.