LONDON, Feb 26 Major world powers agreed today to begin work on a new U N Security Counci

LONDON, Feb 26 (Reuters) Major world powers agreed today to begin work on a new U N Security Council resolution on Iran over its nuclear programme but were still committed to seeking a negotiated solution, British officials said.

Iran dug in its heels over its nuclear programme as the major powers met in Lndon to discuss tightening U N sanctions against the Islamic republic, which the West fears is attempting to produce nuclear weapons.

The five permanent United Nations Security Council members -- the United States, France, Russia, China and Britain -- plus Germany met against a background of rising international tensions about Tehran's nuclear ambitions.

''We had a productive first discussion of the next steps ...

We began work on a new Security Council Resolution,'' said John Sawers, political director of Britain's Foreign Office.

''We also considered how best to re-engage with Iran. We are all committed to seeking a negotiated solution,'' he said in a statement.

Britain said there would be further contacts between the major powers later this week.

In Washington, U S State Department spokesman Sean McCormack told reporters: ''What we think should happen is a new U N Security resolution ... or new incremental steps ... that would increase the diplomatic pressure on Iran.'' No other details were immediately available from the London meeting but the major powers had been thought likely to discuss imposing a travel ban on senior Iranian officials and restrictions on non-nuclear business.

Outside the London talks, the rhetoric was escalating on both sides.

President Mahmoud Ahmadinejad said his country had ''no brake and no reverse gear'' on its nuclear policies, prompting U S Secretary of State Condoleezza Rice to say Tehran needed a ''stop button'' for its programme.

U S Vice President Dick Cheney said all options were on the table following Iran's refusal to heed a U N deadline for halting uranium enrichment. An Iranian deputy foreign minister responded by saying Iran was prepared even for war.

Russia's Foreign Minister Sergei Lavrov said he was worried by talk of possible military strikes against Iran, which he noted had become more frequent.

IRANIAN STANCE In Tehran, a government spokesman said the West's demand Iran suspend enrichment was ''illegal and illogical''.

''Suspending uranium enrichment as a precondition for talks is an illegal and illogical demand and it is in contradiction with the Iranian nation's dignity,'' government spokesman Gholamhossein Elham told a weekly news conference.

''We are ready to preserve our legal rights through talks.'' Iran says it is entitled to nuclear power to generate electricity and wants to negotiate with the Europeans and Washington without giving up its right to enrich uranium.

The West suspects Tehran is trying to build an atomic arsenal.

Rising tensions over Iran, the world's fourth largest oil exporter, affected market sentiment.

The dollar hit a two-month low against the euro of $1.3198 while oil prices neared a fresh 2007 high above $61 a barrel.

Washington has sent a second aircraft carrier to the Gulf with supporting warships, seen as a warning to Iran, and an article in the New Yorker magazine said a Pentagon panel had been created to plan a bombing attack that could be enacted within 24 hours of President George W. Bush's command.

British Prime Minister Tony Blair's spokesman dismissed the article, saying Blair had spoken for Washington too when he recently denied there were plans for military action.

Foreign Secretary Margaret Beckett said Iran was treading a ''dangerous route'' but the West still wanted to negotiate.

''The steps that we have taken are reversible. There is nothing that we would like better than to be able to reverse them and no longer to have to continue with sanctions,'' she told a news conference in Islamabad.

U N sanctions were first imposed on Iran in December, barring the transfer of technology and know-how to its nuclear and missile programme. The resolution said further measures could follow if Iran refused to halt enrichment by February 21.

(Additional reporting by Tehran bureau, Odai Sirri in Doha, Katherine Baldwin) REUTERS SAM RN0012