U.S. President George Bush said Iran is responsible for threatening world security and called for Arab allies to help confront the danger "before it's too late."

His call against Iran comes one week after a tense standoff between Iranian speedboats and a U.S. warship in the Persian Gulf.

Speaking from an opulent Abu Dhabi hotel on Sunday, Bush called Iran "the world's leading state sponsor of terror."

He accused Iran of funding extremists, providing weapons to the Taliban and undermining peace in Lebanon.

He also said the country defied the United Nations by refusing to be open about its nuclear program and threatened the security of U.S. allies in the Persian Gulf.

"Iran's actions threaten the security of nations everywhere," Bush said. "So the United States is strengthening our long-standing security commitments with our friends in the Gulf, and rallying friends around the world to confront this danger before it is too late."

Speaking to an audience dressed in a mix of western attire and Arabic clothes, Bush said advancing democracy and freedom is at the centre of U.S. foreign policy.

Bush spoke directly to the Iraqi people about democratic reform in their country.

"You have made your choice for democracy and have stood firm," Bush said. "The terrorists and extremists cannot prevail."

He made an equally direct appeal to the Palestinians, saying "The dignity and sovereignty that is your right is within your grasp."

Tensions between the U.S. and Iran have grown following the confrontation last Sunday in which Iranian speedboats swarmed a U.S. warship during a tense 20-minute standoff.

On Thursday, the U.S. lodged a formal protest with Iran over the incident. Iran, meanwhile, denied the conflict and has accused the Pentagon of faking audio and video footage.

On Sunday, Iran accused the U.S. of using the incident to spread anti-Iranian sentiment. Foreign Ministry spokesman Mohammad Ali Hosseini said the Bush administration is trying to create tension.

"Some political factions in the U.S. are pursuing adventurism to help Bush to spread Iran-phobia in the region," Hosseini told reporters. "U.S. officials should apologize to Iran, regional countries and the American people."

On Sunday, Bush shared a pancake breakfast with U.S. troops based in Bahrain. There, the commander of the U.S. Navy's 5th Fleet told him he was taking the recent naval confrontation "deadly seriously."

Bush, currently in the United Arab Emirates, is at the midway point of a Mideast tour.

The tour began with stops in Israel and the Palestinian-governed West Bank to renew the push for an Israeli-Palestinian peace pact.

With files from The Associated Press