Obama says military action against Iran not ideal

US President Barack Obama delivers remarks at the Congressional Black Caucus Foundation's Legislative Conference Phoenix Awards Dinner in Washington, September 18, 2010.

(Updates with new quotes)

WASHINGTON (Reuters) - U.S. President Barack Obama said on Monday that Iran having a nuclear weapon would be a "real problem" but he did not think military action by Israel or the United States was the "ideal way" to solve the crisis.

The United Nations Security Council, along with the United States and the European Union, have imposed tougher sanctions on Iran, which has defied international calls for it to halt uranium enrichment.

Iran says it needs the enriched uranium for the peaceful generation of electricity, but the United States and its allies, including Israel, fear Tehran's nuclear program is a cover to build an atomic bomb.

"We continue to be open to diplomatic solutions to resolve this," Obama told a town-hall style meeting on CNBC.

"We don't think that a war between Israel and Iran or military options would be the ideal way to solve this problem. But we are keeping all our options on the table," he said.

U.S. military commanders have also warned that U.S. or Israeli military strikes against Iran could spark retaliatory action by Tehran and proxy groups such as Hezbollah in Lebanon and Hamas in the Gaza strip that could destabilize the region.

(Reporting by Ross Colvin and Patricia Zengerle; Editing by Cynthia Osterman)