President George W. Bush and German Chancellor Angela Merkel shake hands after their news conference at his ranch in Crawford, Texas, yesterday. -Xinhua/Reuters

US President George W. Bush and visiting German Chancellor Angela Merkel said yesterday they would continue a diplomatic solution in dealing with Iran's nuclear program.

"What the Iranian regime must understand is that we will continue to work together to solve this problem diplomatically, which means they will continue to be isolated," Bush told reporters after talks with Merkel at ranch in Crawford, Texas.

On Iran's nuclear program, Merkel said that "We need to think about further possible sanctions," if the efforts by the International Atomic Energy Agency (IAEA) and European Union fail to convince Tehran to back down.

If those efforts fail, she said, "then we need to think about further possible sanctions, and we do not only need to think about them but we also have to then talk and agree on further possible sanctions."

"At the center of all of our efforts has to be sanctions that would then be called by the United Nations Security Council," she said.

Last month, Bush warned that a nuclear-armed Iran evoked the threat of "World War III," while US Secretary of State Condoleezza Rice said that Iran is "perhaps the single greatest challenge" to American national security.

Following its increasing warnings to Iran, the Bush administration imposed new sanctions against Iran's defense ministry, its Revolutionary Guard Corps for their alleged support for terrorist organizations in Iraq and the Middle East, missile sales and nuclear activities.

Tensions are growing between the United States and Iran over Washington's accusations that Iran is secretly developing nuclear weapons and helping Shiite militias in Iraq that target US troops. Iran denies the charges.