UPDATE 1-All threats "dwarfed" by Iran nuclear work - Israel PM
* Media reports charge Iran has stepped up atomic warhead plans
* Obama seen seeking more time for diplomatic pressure on Tehran
By Dan Williams
JERUSALEM, Aug 12 (Reuters) - Prime Minister Benjamin Netanyahu said on Sunday that most threats to Israel's security were "dwarfed" by the prospect of Iran obtaining nuclear weaponry, which local media reports charged Tehran had stepped up its efforts to achieve.
The comments at a weekly cabinet meeting and the front-page reports in the liberal Haaretz, a frequent Netanyahu critic, and in the conservative, pro-government Israel Hayom came as Israeli debate intensified about whether to go to war against Iran - and soon - over its disputed atomic projects.
The debate seemed to defy appeals by U.S. President Barack Obama, seeking re-election in November, to allow more time for international diplomacy. Tehran says its nuclear ambitions are peaceful and has threatened wide-ranging reprisals if attacked.
In comments also broadcast live by Israeli media, Netanyahu said that "all the threats currently being directed against the Israeli home front are dwarfed by another threat, different in scope, different in substance."
"Therefore I say again, that Iran must not be permitted to obtain nuclear weapons," Netanyahu said.
Netanyahu also said Israel was "investing billions in home-front defence," and holding emergency drills, alluding to a military exercise being held this week in cities across Israel to test a text message warning system against missile strikes.
Israel's central bank has also drilled "big crisis" scenarios such as war with Iran, the bank's governor, Stanley Fischer, told an Israeli television station at the weekend.
The cabinet adopted rules on Sunday intended to streamline decision-making, such as by setting deadlines for permitting ministers to change their minds about votes, though Cabinet Secretary Zvi Hauser insisted these changes were not expressly meant for "any particular type of decision."
'BOOSTED' NUCLEAR EFFORTS
Citing an unnamed senior Israeli official, the Haaretz daily said a new National Intelligence Estimate (NIE) compiled by the Obama administration included a "last-minute update" about significant Iranian progress in the development of a nuclear warhead "far beyond the scope known" to U.N. inspectors.
The Israel Hayom daily reported NIE findings that Iran had "boosted efforts" to advance its nuclear programme, including work to develop ballistic missile warheads, and said U.S. and Israeli assessments largely tallied on this intelligence.
Neither newspaper provided direct quotes or detailed evidence. For Haaretz, it was the second report since Thursday purporting to draw on a new NIE.
Washington has not commented on whether such an NIE exists. But its officials say the U.S. intelligence assessment remains that the Islamic Republic is undecided on whether to build a bomb and is years away from any such nuclear capability.
Widely reputed to have the region's sole atomic arsenal, the Jewish state sees a nuclear-armed Iran as a mortal threat and has long threatened to attack its arch-foe preemptively.
The war talk is meant, partly, to stiffen sanctions on Tehran by conflict-wary world powers. Some commentators have speculated Netanyahu is bluffing.
Others see a bid to win over those in the Israeli cabinet, military and public who oppose resorting to force now given the big tactical and strategic risks involved.
Some Israeli leaders criticised the debate as too high-profile, fearing the public exposure could damage Israeli security interests. Finance Minister Yuval Steinitz called it "reckless" to discuss the issue so openly in the media.
Visiting Israel this month, U.S. Defense Secretary Leon Panetta met unusually vocal dissent from Netanyahu over international Iran strategy. The allies have generally sought to play down their differences on the matter.
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