( Reuters ) - Israel tested a missile on Thursday, prompting talk about its ability to launch nuclear strikes on Iran, while the Iranian president said Israel would regret any attack.
The missile test came after Israeli warnings and accusations about Tehran's atomic ambitions and drew a defiant response from Iranian President Mahmoud Ahmadinejad.
"The Zionist regime ... would not dare attack Iran" he told Al Jazeera television, referring to Israel in remarks translated into Arabic. "The Iranian response would make them regret it, and they know this."
Oil briefly rose almost $1 to above $92 a barrel on news of the missile test, which came three days after Prime Minister Ehud Olmert said the Jewish state would consider all options to prevent Iran from developing nuclear weapons.
Israeli Foreign Minister Tzipi Livni urged the West to work harder to prevent "the appearance of a nuclear Iran".
Israel, Washington's staunchest ally in the Middle East, says Iran could have a nuclear bomb by 2010 and that an Iranian nuclear weapon would threaten Israel's existence.
Israel's Defence Ministry said in a brief statement: "A successful missile launch was carried out within the framework of examining rocket propulsion."
Israel Radio said the missile tested was capable of carrying an "unconventional payload" -- an apparent reference to the nuclear warheads Israel is assumed to possess, though whose existence it has never publicly confirmed.
Israel Radio quoted unidentified foreign reports as saying Israel was developing the Jericho III long-range surface-to-surface missile.
Amateur photos posted on Israeli news Web sites showed a white plume in the sky above central Israel.
Analysts were divided on the significance of the test and the Defence Ministry gave only few details. A former Israeli missile expert said: "There are no messages". But a serving defence official said Israel was "not just flexing its muscles".
Israel is believed to have atomic weapons and foreign analysts have said for many years that its Jericho I and Jericho II missiles can carry nuclear warheads.