Israel told visiting U.S. Defense Secretary Leon Panetta on Wednesday that time was running out for a peaceful settlement to the nuclear dispute with Iran because sanctions and tough talk over possible military action were failing to sway Tehran.

Speculation is rampant over whether Israel will make a military strike against Iran to halt a nuclear program that the West suspects is aimed at building an atomic bomb but which Tehran says is entirely peaceful.

Panetta assured Israel that the United States would not allow Iran to develop a nuclear bomb. Using a tough tone, he suggested military action was possible after all other options were exhausted.

“This is not about containment. This is about making very clear that they are never to be able to get an atomic weapon,” Panetta said in Jerusalem.

“If they make the decision to proceed with a nuclear weapon...we have options that we are prepared to implement to ensure that that does not happen,” said Panetta, whose visit to the close U.S. ally included a tour of an anti-rocket battery known as “Iron Dome”.

Israeli Prime Minister Benjamin Netanyahu signaled that such declarations were of little comfort.

“However forceful our statements, they have not convinced Iran that we are serious about stopping them,” Netanyahu said, standing next to Panetta at the prime minister’s residence in Jerusalem.

“Right now the Iranian regime believes that the international community does not have the will to stop its nuclear program. This must change, and it must change quickly because time to resolve this issue peacefully is running out.”

Any conflict could easily draw in the United States, where debate over Israel and Iran figures in campaigning for the presidential election in November. Republican candidate Mitt Romney visited Israel this week.