Echoing statements of concern from governments around the world, Blair said the move showed malign intent and noted Iran's feared pursuit of nuclear weapons would be discussed by the British, French and German foreign ministers in Berlin on Thursday.
"The first thing to do is to secure agreement for a reference to the Security Council, if that is indeed what the allies jointly decide, as I think seems likely," he told parliament.
Referring to possible sanctions, he added: "Obviously we don't rule out any measures at all. It's important Iran recognises how seriously the international community treats this."
"But I think we are better to go through the process of first having the meetings and discussion and reaching agreement, and then we can set out what measures we want to take."
Tehran dramatically upped the stakes in its showdown with the international community on Tuesday when it broke the seals at its Natanz nuclear facility to resume its research into uranium enrichment.
Defense minister Sergei Ivanov, from Russia - whose proposal to enrich uranium jointly with Iran at a site on Russian territory is generally supported by the West - hardened his rhetoric saying the resumption was "cause for alarm".
Iran's decision to resume nuclear research "personally disappoints me and gives some cause for alarm," Russian news agencies quoted Ivanov as saying.
The powerful Russian minister declined to speculate on whether the growing confrontation over Iran's nuclear program would lead to action by the UN Security Council, but said things were not moving in a positive direction for anyone.
US President George W. Bush's spokesman Scott McClellan said if Iran breaches its international obligations, "there's no other choice" but to refer the matter to the UN, although he said there were no plans to use military force.
Elsewhere, Australia said it was "extremely concerned" about the development, Japan urged Iran to "immediately cease" its nuclear activities while Italy said the situation was a "reason for serious and constant worry".
Blair put Iran's move in the context of Iranian President Mahmud Ahmadinejad's widely condemned call last October for Israel to be wiped off the map.
"The breaking of the seals [and] the statements on Israel are important statements that, I'm afraid, indicate a malign intention on the part of the Iranian regime," he said during his weekly question and answer session. "I don't think there is any point in us hiding our deep dismay at what Iran has decided to do."
In Israel itself, acting prime minister Ehud Olmert said Iran must be referred to the UN Security Council "as soon as possible" for enforcement action to prevent it developing a nuclear capability.
The watchdog International Atomic Energy Agency (IAEA) agreed last year to refer Iran to the UN Security Council, a potential prelude to sanctions, but held back from actually doing so to enable EU talks with Tehran to go forward.
Any referral to the Security Council would normally go through the IAEA.
Enriched uranium can be used to power nuclear power stations, and Iran insists its intentions are civilian and peaceful, but the United States and Europe fear the real aim is to develop nuclear weapons.
Straw warned on Tuesday that if Iran possessed nuclear weapons, peace and stability in the Middle East would be threatened, and global security endangered.
He also said that there was "no good reason" for Iran to have resumed its research if its intentions were truly peaceful. But he insisted that a pre-emptive military strike, possibly by Israel or the United States, was not on the agenda, and that the focus was firmly on diplomatic action.
© 2005 Agence France-Presse
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