Britain's defense minister said Thursday Iran is assumed to be working "flat out" on a nuclear weapons capability and will only be deterred if the cost to its economy becomes too high.

But Defense Secretary Philip Hammond said Britain would not favor a preemptive strike against Iran's nuclear facilities, and instead will rely on sanctions targeting its oil exports, central bank and general economy.

"My working assumption is that they are flat out," Hammond said in a question-and-answer session at a US think tank here, referring to the Iranian nuclear efforts. "I think they are going as fast as they can."

"And I think our working assumption also has to be that Iran is set on a course that it will only be deterred from if the price for achieving the goal that they set out becomes too high.

"That is what we are in the process of doing by stepping up the pressure on oil revenues, on the operation of the central bank, on the economy generally," he said.

Hammond, who was to meet later in the day with US Defense Secretary Leon Panetta, spoke a day after the European Union reached a preliminary agreement on an oil embargo against Iran. The timing of such a move was still under debate.

Iran's has threatened to close the strategic Strait of Hormuz, through which 20 percent of the world's oil flows, if it is hit with sanctions, and has warned the United States not to send an aircraft carrier back into the Gulf.

The tensions have sent the price of oil soaring.

Hammond said both Britain and the United States would make sure that their response to any provocation was "very measured, that there isn't an accidental escalation. What we cannot answer for is whether there is a plan on the other side to escalate."

In response to a question, he said: "We would not favor a preemptive strike. We have been very clear that we need to maintain the pressure but we also need to engage. And any question of a preemptive strike is abandoning the engagement."