Defense Minister Ehud Barak on Friday said that the threat of a nuclear Iran poses a challenge for the international community, not just for Israel.

"I can hardly think of a stable world order with a nuclear Iran," Barak said during a speech at the Washington Institute for Near East Policy, according to media reports. "What is really needed is significant sanctions, effective ones, within a time limit."

Barak also said he doubts Iran would launch a nuclear attack against Israel, but warned that a nuclear-armed Iran could destabilize the Middle East, disrupt oil supplies and strengthen Hezbollah and Hamas, which Iran sponsors financially and militarily.

"I don't think the Iranians, even if they got the bomb, are going to drop it in the neighborhood," Barak said.

"They fully understand what might follow. They are radical but not total 'meshugah,'" said Barak, using the Yiddish word for crazy. "They have a quite sophisticated decision-making process and they understand realities."

Barak said Israel appreciates the U.S. push for "effective" sanctions against Iran, within a limited time frame, but said the international community must prepare for "the possibility that in spite of all effort, it will not lead to Iran accepting the international norms."

"Iran is not living up to its responsibilities and we are working with our partners in the international community to increase pressure on Iran to change course," U.S. Secretary of State Hillary Clinton said during a photo op with the Defense Minister.

Barak also discussed the revivial of Mideast peace talks and the humanitarian situation in Gaza during his meeting Friday with Clinton.

Clinton also pressed Barak about easing the blockade of the Gaza Strip, and told reporters she had an extended discussion with Barak about the Mediterranean coastal strip, which was severely damaged in an Israeli offensive launched in December 2008.

More than 1,400 Palestinians and 13 Israelis were killed in the three-week war in Gaza, which Israel launched following months of rocket fire from the territory into Israel.

Israel has said its blockade of Gaza aims to prevent Hamas, which is hostile to Israel and which seized control of Gaza in 2007, from acquiring weapons or materials that could be used for military purposes.

Some analysts believe the blockade has strengthen Hamas' hand because of its control over smuggling through tunnels from Egypt. It is also a major irritant to Arab states whose support is vital to resuming Israeli-Palestinian peace talks.

"We discussed it at length and Sen. Mitchell and I made clear some of the concerns that we had and some of the ideas about what more could and should be done," Clinton told reporters after she and U.S. special envoy George Mitchell met Barak. "We hope to see progress there."

Israeli-Palestinian peace talks stalled after the Gaza offensive. Despite calling the Arab-Israeli conflict a priority from the start of his administration, U.S. President Barack Obama's efforts have failed to revive them.

The United States has long urged Israel to ease restrictions on Gaza, where building materials, among other things, remain in chronic short supply and have slowed reconstruction for the territory's 1.5 million residents.

Speaking before his meeting with Clinton, Barak said the issue was complicated by the continued captivity of Israeli soldier Gilad Shalit, who was seized in 2006 by militants who tunneled into Israel from Gaza.

Barak told the Washington Institute for Near East Policy think tank Hamas continues to be deterred from launching major attacks on Israel because of the late 2008, early 2009 Israeli offensive but it also continues to rearm.

"They are well-deterred. But still they are accumulating more, longer-range rockets through the smuggling system that goes all the way from Iran through Africa to the Gaza Strip," he said.

"And the situation is not fully stable," he added. "We still have the abducted soldier (Shalit) and that complicates some aspects of the normalization of the situation."

Daniel Levy, an analyst with the New America Foundation think tank, noted Clinton was pressed by senior Arab officials as well as ordinary citizens about the situation in Gaza when she visited the Gulf last week.

"The threat to the peace talks is renewed violence in Gaza... but equally problematic for the United States is what the secretary heard in Qatar and Saudi Arabia ... 'what are you doing for Gaza?'" Levy said. "It undermines the credibility of the United States."

The administration also lost credibility in the Arab world last year when it appeared to soften its demand for a total freeze on Israeli construction in Jewish settlements on the West Bank and in Jerusalem, a step widely seen as undercutting Palestinian President Mahmoud Abbas.

U.S. officials hope Abbas can be persuaded to give up his desire for an absolute halt to settlement construction before resuming talks, particularly if he gets backing from Arab states. They hope this might be forthcoming at an Arab League summit in Tripoli in March.