Middle East peace envoy Blair launches attack on Iran

The former prime minister also criticised 'some of our own circles' for arguing that the West had provoked Islamist groups to commit terror acts.

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In his first major speech since leaving office, he also condemned the 'demonic skill' deployed by Muslim extremists and singled out Iran for backing and financing terror to destabilise other countries.

At the prestigious New York charity event, Mr Blair received three standing ovations during the evening, was joined by New York governor Eliot Spitzer, mayor Michael Bloomberg and News Corporation chairman Rupert Murdoch.

Cardinal Edward Egan called Mr Blair a "great and effective warrior" and said: "You lifted our hearts and reminded us how powerful real eloquence can be."

His defiant stance is likely to be contrasted with Gordon Brown's decision to withdraw thousands of British troops from Iraq over coming months.

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Mr Blair argued that Britain needs to show 'even greater determination and belief' in standing up for its values.

Speaking at a charity dinner at New York's Waldorf Astoria Hotel, he said: "Analogies with the past are never properly accurate and analogies especially with the rising fascism can be easily misleading, but in pure chronology I sometimes wonder if we're not in the 1920s or 1930s again."

Mr Blair said the world should not be 'forced into retreat' in an attempt to appease extremists whom he accused of using the Israeli-Palestinian dispute to play on the 'fears and grievances' of Muslims.

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He added: "There is a tendency even now, even in some of our own circles, to believe that they are as they are because we have provoked them and if we left them alone they would leave us alone. I fear this is mistaken.

"They have made their choice and leave us with only one to make - to be forced into retreat or to exhibit even greater determination and belief in standing up for our values than they do in standing up for theirs."

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Mr Blair, who now represents the US, Europe, Russia and the United Nations on the Middle East, added: "This struggle is far from over. The ideology driving this extremism and terror is not exhausted.

"On the contrary, it believes it can and will exhaust us first."