* New Iran President Rouhani has cast himself as moderate
* Senate panel expected to vote on sanctions bill in Sept
* US officials have argued for a pause in new measures
By Timothy Gardner
WASHINGTON, Aug 5 (Reuters) - A majority of U.S. senators have urged President Barack Obama to raise pressure on Iran over its disputed nuclear program by toughening sanctions and renewing the option to use military force while also exploring diplomatic solutions.
The senators' letter to Obama came as Iran's President Hassan Rouhani, who has cast himself as a moderate and pledged to pursue less confrontational policies abroad, took office.
"We must be prepared to act and Iran must see that we are prepared," 76 senators in the 100-member body said in the letter, sent late on Friday ahead of Rouhani's swearing in on Sunday.
Until they see a significant slowdown of Iran's nuclear activities, "we believe our nation must toughen sanctions and reinforce the credibility of our option to use military force at the same time as we fully explore a diplomatic solution to our dispute with Iran," the senators said in the letter.
The letter, spearheaded by Foreign Relations Committee Chairman Robert Menendez and five other senators from both parties, urged Obama to demand Iran take immediate steps, including moving toward compliance with U.N. Security Council resolutions that say Iran must suspend enrichment of uranium.
"Iran needs to understand that the time for diplomacy is nearing its end," the letter said.
Western powers say the nuclear program is enriching uranium that could be used to fuel a nuclear weapon. Iran insists that the program is for peaceful purposes including power generation and medical devices.
U.S. and EU sanctions have had a deepening impact on Iran's economy over the last year and a half as they slashed oil imports, the country's main source of income.
The measures have already cut Iran's oil exports by more than half compared to pre-sanctions levels of about 2.2 million barrels per day, helping to devalue Iran's currency and contributing to a steep rise in inflation.
The Senate Banking Committee is expected in September to pass a version of tougher Iran sanctions that could further push down oil exports from the OPEC member. That comes after the House of Representatives passed a bill on harsher sanctions last week. The full Senate is expected to take up the bill sometime in the fall.
The White House declined to publicly back the sanctions bill passed by the House, in what could be a sign that the administration sees some hope in Rouhani's winning the presidency.
U.S. officials still favor economic pressure to force Tehran to halt the program, particularly as the Supreme Leader Ayatollah Ali Khamenei has the last say on Iran's foreign policy. But they have argued for a pause in new U.S. measures to see if Rouhani is interested in a nuclear deal. (Reporting by Timothy Gardner; Editing by Ros Krasny and Cynthia Osterman)