International sanctions against Iran are biting but are not slowing the country's nuclear programme, Israel's strategic affairs minister Moshe Yaalon said on Tuesday.

"The sanctions and the pressure in place against Iran for around the past two years are effective, but the centrifuges continue to turn," Yaalon told Israeli public radio.

"There is a sanctions clock, and the Iranian nuclear programme is getting closer and closer to the red line," he added.

"We think it is necessary to impose harsh sanctions, economic, political or otherwise, again Iran, and we retain the military option," Yaalon said.

"But the fact is that diplomacy is not working and the sanctions have not had the desired effect because Iran is continuing its nuclear programme."

Israel, the Middle East's sole if undeclared nuclear power, and much of the international community, believe Iran's nuclear programme masks a weapons drive.

Tehran says the programme is for peaceful energy and medical purposes, but has been slammed with increasingly harsh sanctions that have squeezed the country's economy.

On Monday, Iran's currency plummeted at least 17 percent in trading, prompting the US State Department to describe the freefall as evidence that sanctions were putting pressure on the Iranian government.

"From our perspective this speaks to the unrelenting and increasingly successful international pressure that we are all bringing to bear on the Iranian economy. It's under incredible strain," State Department spokeswoman Victoria Nuland said.