Cheney, speaking at a joint news conference with Australia's Prime Minister John Howard, said the United States remained "deeply concerned" about Iran's activities, including the "aggressive" sponsoring of terrorist group Hezbollah and inflammatory statements by President Mahmoud Ahmadinejad.

He said top U.S. officials would meet soon with European allies to decide the next step toward planned tough sanctions against Iran for its pursuit of nuclear weapons.

"We worked with the European community and the United Nations to put together a set of policies to persuade the Iranians to give up their aspirations and resolve the matter peacefully, and that is still our preference," Cheney said.

"But I've also made the point, and the president has made the point, that all options are on the table," he said, appearing to leave open the possibility of military action.

The White House has previously made similar comments.

"We believe it would be a serious mistake if a nation such as Iran became a nuclear power," he said.

The International Atomic Energy Agency reported on Thursday that Iran had not only ignored a U.N. Security Council ultimatum to freeze the enrichment program, but had expanded that program by setting up hundreds of centrifuges. Enriched uranium fuels nuclear reactors but, enriched further, is used in nuclear bombs.

Undersecretary of State Nicholas Burns will travel to London on Monday to meet with the United States' negotiating partners to try to draft a new resolution on Iran that could include tough economic and military sanctions.

The IAEA report came after the expiration Wednesday of a 60-day grace period for Iran to halt uranium enrichment.