Confront the threat of Iran before it's too late, Bush tells allies as he visits the Gulf

Describing the country as the leading state sponsor of terror, he urged America's Arab allies to join the U.S. in confronting the danger "before it's too late".

Aides last night denied his words were a call to arms, but that is how they are likely to be interpreted by Islamic militants.

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Mr Bush said Iran funded terrorist extremists and sent arms to the Taliban.

He said it intimidated its neighbours with alarming rhetoric, defied the United Nations and destabilised the Middle East by refusing to be open about its nuclear programme.

"Iran's actions threaten the security of nations everywhere," he declared in a speech in the Middle East.

"So the United States is strengthening our longstanding security commitments with our friends in the Gulf, and rallying friends around the world to confront this danger before it is too late.'

Tensions were heightened last week with a clash between Iranian speedboats and the U.S. Navy in the Strait of Hormuz oil route.

The crisis prompted Mr Bush to say "all options" remained on the table. He also refused to rule out military strikes on Tehran's nuclear sites.

Yesterday however it emerged the drama may have been sparked by a prankster issuing a radio message to three U.S. warships threatening: "I am coming to you. You will explode in a few minutes."

Pentagon officials initially claimed the threat was from one of five Iranian Revolutionary Guard speedboats but have since backtracked, saying they do not know the source of the radio transmission.

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The Americans were within seconds of opening fire in self defence when the Iranian boats sped away.

Now the U.S. Navy's newspaper is reporting the culprit could have been "Filipino monkey", a local heckler who listens in on ship-to-ship radio conversations and jumps in with insults.

The incident highlighted the tense situation in the Gulf, and the need for Mr Bush to keep his Arab allies onside.

As a result, although the second part of his speech raised the thorny issue of democracy in some allied nations, he did not name names.

Chiding U.S. allies who have withheld civil liberties, he said governments would never build trust by harassing or imprisoning candidates and protesters.

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His rebuke was general, and he did not single out any state for oppressive practices.

He was however speaking in the United Arab Emirates, a deeply undemocratic country where an elite of royal rulers makes virtually all the decisions.

Large numbers of foreign workers have few legal or human rights, including no right to protest about employment conditions.

Mr Bush spoke at the Emirates Palace in Abu Dhabi, an opulent, gold-trimmed hotel where a suite goes for £1,250 a night. Built at a cost of £ 1.5billion, the hotel is half a mile long and boasts a mile-long white sand beach - every grain of it imported from Algeria.

Mr Bush said advancing democracy and freedom was the core of his administration's foreign policy.

"Democracy is the only system of government that yields lasting peace and stability," he declared.

Some human rights groups have accused the Emirates of tolerating virtual servitude, where workers from poor countries such as Sri Lanka are forced to work to pay off debts to employers, and have their passports seized so they can't leave.

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Officials in Abu Dhabi and Dubai have said they are taking gradual steps toward democratic reform.

Daniel Barenboim, the Israeli pianist and conductor, has taken Palestinian citizenship in a move he says could serve as a model for peace between the two peoples.

Mr Barenboim has been active for some years in promoting contact between young Arab and Israeli musicians.