Iran has stymied a UN inquiry into whether it covertly researched how to make an atom bomb while steadily expanding uranium enrichment in defiance of international demands, a nuclear watchdog report said on Monday.

Iran blamed the International Atomic Energy Agency for the impasse. A senior Iranian official, who asked not to be named, called on the Vienna-based IAEA to change its approach and work in a "legal and logical" manner.

The White House called on Iran to stop enriching uranium or face the possibility of more UN sanctions adding to relatively modest punitive measures the Islamic Republic has shrugged off.

A confidential report by the IAEA, the UN's nuclear agency, said Iran had raised the number of centrifuges enriching uranium to 3,820, compared with 3,300 in May, with over 2,000 more being installed.

"We have arrived at a gridlock," said a senior UN official familiar with the latest report, which urged Iran to take the intelligence allegations seriously to defuse suspicions its nuclear work is not entirely peaceful.

But Iran seemed some way from refining enough uranium to build a nuclear weapon, if it chose, the report indicated. Iran had stockpiled 480 kg (1,050 pounds) of low-enriched uranium so far. It would need 1,700 kg (3,740 pounds) to convert into high-enriched uranium (HEU) for fuelling an atom bomb, said UN officials who spoke on condition of anonymity.

"That would be a significant quantity, one unit of HEU, and would take of the order of two years," said one official.

On the day the report emerged, Iran announced air defence exercises in half of the Islamic Republic's 30 provinces.

Air defence commander Brigadier General Ahmad Mighani "emphasised that the enemies would receive a serious response for any aggression and we would surprise them and make them regretful," the ISNA agency in Tehran reported.

Washington says it wants a diplomatic solution to the nuclear standoff, but has not ruled out military action if that fails. Iran, the world's fourth-largest oil exporter, says its nuclear programme is a peaceful drive to generate electricity.

In its last report in May, the IAEA said Iran appeared to be withholding information needed to explain intelligence that it had linked projects to process uranium, test high explosives and modify a missile cone in a way suitable for a nuclear warhead.

IAEA chief Mohamed ElBaradei called on Iran then for "full disclosure" - namely, going beyond flat denials without providing access to sites, documentation or relevant officials for interviews to substantiate their stance.

Monday's report said Iran had done nothing to that end. "Regrettably the agency has not been able to make any substantial progress on the alleged (weaponisation) studies and other associated key remaining issues which remain of serious concern," the report said.

It said IAEA investigators had stressed to Iran that the intelligence documentation was detailed and consistent enough "that it needs to be taken seriously, particularly in light of the fact that, as acknowledged by Iran, some of the information contained in it was factually accurate," it said.

Unless Iran provided such transparency and allowed wider-ranging, snap UN inspections, the report said, the agency "will not be able to provide credible assurances about the absence of undeclared nuclear material and activities in Iran".

Gregory Schulte, US ambassador to the IAEA, said Iran was continuing to "rebuff the IAEA across the board" in defiance of four UN Security Council resolutions demanding it suspend enrichment and come clean with UN investigators.

"Iran's refusal to address the (issues) is particularly troubling as it continues to develop the abilities to produce fissile material that could be weaponised into a nuclear bomb," Schulte told reporters.

The report said Iran was also pressing ahead with tests