Amir Kahanovich, chief economist at Clal Finance, one of Israel's largest brokerage houses, says a sharp rise in the price of oil, the costs of war and the damage to global trade will cause the world to soft-pedal Iranian nuclear ambitions.

In a report entitled "The Iranian Issue through Economic Eyes," Kahanovich laid out courses of action - ranging from additional "light sanctions" to military strikes - and told investors he expected world leaders to balk at taking the steps needed to stop Iran's nuclear drive.

Kahanovich wrote that even for Israel the economic cost of a military confrontation that could include retaliatory missile attacks by Tehran and its proxies in Gaza and Lebanon would be too high, Reuters reported.

"Unfortunately, it appears that a nuclear Iran is the most reasonable [economic] scenario," he added.

His remarks came after President Shimon Peres said earlier this month that an attack on Iran was becoming increasingly more likely.

Reports have swirled in Israel's press for several weeks about a potential strike on Iran's nuclear facilities, which Prime Minister Binyamin Netanyahu and Defense Minister Ehud Barak reportedly advocate.

Barak has said Israel "talks too much" about potential action against Iran and criticized the public sector of drastically overestimating the actual damage Iran could inflict in counter-strikes to such an operation.

Deaths would be limited to "several hundred," Barak said.

In reply, senior Iranian officials described the alleged threats of an attack as "foolish remarks," and warned the friends and allies of the Islamic Revolution would "destroy Israel" before it can make the slightest military move against Iran.

Barak's remarks came just ahead of an International Atomic Energy Agency report citing "credible Israeli and Western intelligence sources" that indicated Iran was seeking nuclear weapons technology.

Iranian officials have repeatedly threatened Israel with destruction calling it a "one bomb state" since launching their nuclear program in the 1990's.

Meanwhile, Iran's Supreme Leader Ayatollah Seyed Ali Khamenei said Thursday Iran will respond to any military strike by Israel or the United States with "iron fists."