By DAVID GARDNER

Last updated at 10:09 29 August 2007

George Bush warned last night that he is ready to take military action against Iran over its meddling in Iraq and its nuclear ambitions.

He spoke just hours after the nation's hardline president threatened to fill a "power vacuum" in Iraq when US and British troops leave.

Mr Bush said he had authorised his commanders in Iraq "to confront Iran's murderous activities there".

And he claimed that its leader's atomic ambitions are putting the Middle East "under the shadow of a nuclear holocaust".

"We will confront the danger of Iran before it is too late," he warned. The U.S. president said Iran is endangering the entire world.

"Iran's actions threaten the security of nations everywhere, and the United States is rallying friends and allies to isolate Iran's regime to impose economic sanctions," he added.

The war of words began earlier in the day, when Iran's president Mahmoud Ahmadinejad announced that he is waiting to take the lead in Iraq.

"The political power of the occupiers of Iraq is being destroyed rapidly and very soon we will be witnessing a great power vacuum in the region," he said in a live television broadcast.

"We, with the help of regional friends and the Iraqi nation, are ready to fill this void."

In a speech clearly written to fuel anti-U.S. sentiments in the Middle East, he said the Americans are "trapped in the swamp of their own crimes and have no choice but to accept the failure and accept the independence and rights of the Iraqi nation".

He added: "If you stay in Iraq for another 50 years nothing will improve - it will just worsen."

He also insisted that his country's sensitive nuclear work - which the West fears is aimed at making weapons - is continuing.

Mr Bush's response was swift and sharp. He attacked Iran for supplying arms to rebel militias in Iraq and said he has authorised U.S. military chiefs to crack down on any Iranian activities there.

He said Tehran cannot avoid some responsibility for attacks on British and American troops and Iraqi civilians. And he warned of the dangers of its nuclear programme.

"Iran's active pursuit of technology that could lead to nuclear weapons threatens to put a region already known for instability and violence under the shadow of a nuclear holocaust," he said.

Tehran's power games in the region seem to have made an impact in both Downing Street and Washington.

After appearing intent on withdrawing British forces from Basra, Gordon Brown is now resisting demands for a timetable.

He said this week he will not "cut and run" from the conflict. Mr Bush continues to defy public opinion in the U.S. by pushing for more time for a troop surge in Iraq to work. Yesterday's speech was his second in a week aimed at building support for the war.

Both leaders have hinted they will make a decision on whether to bring soldiers home next month, after America's top commander in Iraq, General David Petraeus, reports to Congress on the progress of the war.

But Mr Bush's speech yesterday to army veterans at the American Legion convention in Reno, Nevada, reinforced analysts' opinions that the general will back a decision to stay the course.

The president claimed there are "unmistakable signs" of success with the surge. He said the extra 30,000 troops pumped into Iraq had Al Qaeda on the run and that sectarian violence in Baghdad had decreased in recent months.

He stressed that withdrawing the U.S. military would allow the Middle East to be taken over by extremist forces and threaten the security of America and its population.

"I want our fellow citizens to consider what would happen if these forces of radicalism and extremism were allowed to drive us out of the Middle East," Mr Bush said.

"The region would be dramatically transformed in a way that could imperil the civilised world. America will not abandon Iraq in its hour of need."

Mr Bush portrayed the war as the quickest way to put the entire Middle East on a path to democracy, economic expansion and stability.

His words received a friendly response from the veterans group. Meanwhile, the violence continued in Iraq. Police ordered thousands of pilgrims to leave the holy city of Kerbala after a gun battle between officers and Shia rebels.

As many as 28 were killed and 144 wounded in the fighting around two of Shi'ite Islam's holiest shrines.

America's tough new stance against Iran was highlighted within hours of Mr Bush's speech as US soldiers in Baghdad arrested members of an Iranian delegation.

Footage shown on TV showed the men, handcuffed and blindfolded, being led away from a hotel in the city.

US troops earlier surrounded the hotel, then searched the rooms and belongings of the Iranians before taking them away in four military Hummer vehicles.

Iran put out a statement saying the arrested men were an Iranian delegation from Tehran's Energy Ministry on a visit to Iraq to sign an electricity supply contract.

The United States has been holding five Iranians since January. Washington says the men are linked to Iran's Revolutionary Guards and were providing support.