Prime Minister Tony Blair says people are "increasingly alarmed" by Iran's strategy but said military action was not being planned against it.
Iranian President Ahmadinejad
He said no option was "off the table" but "nobody is talking about or planning military intervention".
Iran's nuclear programme and strategy create the maximum trouble for us" in the region was a "miscalculation", he told a committee of senior MPs.
Mr Blair also said Tehran was trying to prevent reconciliation in Iraq.
He told MPs: "Their strategy is to create the maximum trouble for us and for the region and I think that is a miscalculation because in the end they are going to find that they assemble a very large coalition against them.
"Nobody's talking about military intervention in respect of Iran but people are increasingly alarmed and concerned at the strategy that they appear to be pursing."
He added that he was sure numerous "doors would open", if they showed some sign that they were prepared to change that strategy.
He said that the Iranian people were seeing a "squeeze" on their living standards as a result of the current situation.
Iran says its efforts to enrich uranium are an expression of its right to develop nuclear power under the Nuclear Non-Proliferation Treaty of which it is a member.
Under the treaty, non-nuclear weapons states area can acquire nuclear technology for civil purposes, but commit themselves not to build a bomb.
But the US and its Western allies suspect Iran of using its nuclear energy programme as a cover to produce atomic weapons.
On Monday a coalition of charities, faith groups and unions urged Mr Blair to put pressure on the US to enter talks with Tehran.
They said any military action against Iran would destabilise the region and provoke further attacks against British forces in Iraq and Afghanistan.
And on Sunday three former high-ranking US military officers warned that the crisis must be resolved through diplomacy, urging Washington to start direct talks with Iran.