Intelligence obtained by the International Atomic Energy Agency (IAEA) reveals that Iran has been modifying its Shihab-3 ballistic missiles to carry nuclear warheads.

IAEA agents presented the intelligence on Tuesday after Iran rejected their requests to formally examine its ballistic missile program alongside an ongoing investigation into the intents of its nuclear program.

Senior IAEA officials called the information "very credible" and demanded that Iran provide "substantive responses."

Tehran rejected the intelligence as "forged."

Meanwhile, Italian Prime Minister Silvio Berlusconi on Tuesday called Iranian President Mahmoud Ahmadinejad a lunatic, but warned against taking his threats against Israel too lightly.

Speaking to a Jewish organization in Paris, Berlusconi said that the world "must pay the utmost attention to the lunacy of someone who says...that Israel must be wiped off the map."

A senior US political figure said that while Washington is keeping a close eye on Ahmadinejad, there is now a prevailing assumption that international diplomatic efforts are succeeding in putting pressure on Iran, and that military intervention will not be necessary to halt the Islamic Republic's quest for nuclear weapons.

Speaking to The Jerusalem Post, David Wurmser, a former national security advisor to US Vice President Dick Cheney, said that Israel should know there is now no chance of President George W. Bush launching a military strike against Iran before the end of his second term in January.