Relations between the UK and Israel were put under intense strain this week as Britain joined the US and EU to increase the pressure on Israeli Prime Minister Benjamin Netanyahu to give time for sanctions to work rather than launching military action against Iran.

The Foreign Office refused to comment on reports that David Cameron had personally sent the head of MI6, Sir John Sawers, as an emissary to Israel to make clear the strength of British opposition.

However an FCO spokesman said: “Israel, like everyone else, should give a real chance to the approach we’ve adopted: serious economic sanctions, diplomatic pressure and negotiations with Iran.”

According to the Daily Mail, “C”, as the head of MI6 is known, visited Israel two weeks ago, where he met Mr Netanyahu and his Defence Minister Ehud Barak. Israeli officials refused to confirm or deny that it was Sir John who visited Jerusalem, though a source confirmed earlier this week to Ha’aretz that a “senior emissary” from David Cameron had indeed met Mr Netanyahu.

Mr Netanyahu has been the focus of international pressure in recent weeks, with messages coming from leaders of major Western countries — including a phone call from German Chancellor Angela Merkel last week — urging him not to launch a strike on Iran.

I call on Israel to rethink its approach as a matter of urgency - William Hague

In an effort to allay Israel’s security concerns, Mrs Merkel reportedly informed Mr Netanyahu that Germany would not be selling advanced submarines to the Egyptian navy.

The Foreign Office now claims that sanctions are having a serious impact on Iran. According to officials, oil exports have dropped by around a million barrels a day with the Islamic Republic losing almost $8 billion in revenues per quarter. With the regime unable to access most of its foreign reserves, inflation is also said to have soared.

Sir John Sawers is an intriguing choice of emissary to Israel. The head of MI6 has vast experience of Foreign Office service in the Middle East, latterly in Egypt, where he served as ambassador. One observer described him as “a classic FCO Arabist”.

Sir John was political director at the FCO in 2005, when a serious push was made to improve lines of communication with the Muslim Brotherhood.

Senior Israeli diplomats and security officials have acknowledged that the intelligence ties between Israel and Britain have acquired special significance in recent years. One intelligence officer defined the level of information passed through back-channels as “crown jewels value”.

The New Yorker claimed this week that MI6 was the only non-US security service to be informed in advance of Israel’s plan to bomb the Syrian nuclear reactor in September 2007.

“Our relationship with British intelligence, especially the co-operation over Iran and the war against terror, has withstood diplomatic crises between our two countries,” said one Israeli official. Israel sees Britain as its strongest ally against Iran, after the US, and particularly values the role the City of London plays in creating a financial blockade of Iran.

As the diplomatic tension increased this week over Israel’s stance towards Iran, Foreign Secretary William Hague spoke in his strongest terms yet about settlement building when he attacked the decision to give university status to Ariel College on the West Bank.

Unusually, Mr Hague chose to intervene in internal Israeli policy matters when he urged Mr Netanyahu to reconsider.

He said that if the upgrade went ahead, “this would lead to the creation of Israel’s first university beyond the Green Line, in a settlement illegal under international law”.

Mr Hague added: “This move is particularly regrettable because it comes at a time of rapidly expanding co-operation between UK and Israeli universities, and when the British Government has taken a firm stand against those who seek to undermine Israel’s legitimacy by boycotting educational and cultural institutions. I call on the government of Israel to reconsider its approach as a matter of urgency.”

Israeli diplomats say they are concerned at the intensification of the denunciations by the FCO of Israel’s settlement activity. “We know this is Britain’s policy but we don’t like the way they seem to feel the need to lead every time with a quick condemnation,” said one. “But for now we prefer not to respond and cause an escalation of words. There are other, more important things we are doing with the British.”

FCO sources insisted there had been no shift in the UK’s position towards Israel, which remained a “genuine friend”, but that the Foreign Secretary’s language had been intentionally strong.

Within Israel there has been speculation that the pressure on Mr Netanyahu has yielded a result and that Israel has assured the US administration that it does not plan to launch a strike against Iran in the next two months, before the presidential election. At a meeting of his Atzmaut (Independence) party last Thursday, Defence Minister Ehud Barak, a leading voice in favour of an attack, said: “While Israel reserves the right to take sovereign decisions, and the United States respects that, there can be no mistaking the impressive scale of American preparations to deal with the Iranian challenge on all levels.”

On Sunday, Secretary of State Hillary Clinton referred to Mr Netanyahu’s demands that the international community set “red lines” for Iran to dissuade it from developing its nuclear programme. She said the US was “not setting deadlines” and that diplomacy remained “by far the best approach”.

This week, it transpired that the White House has turned down a request by Mr Netanyahu for a meeting with Mr Obama when the Israeli leader travels to America for the UN General Assembly later this month. Yet Mr Obama has said he will find time to meet Egyptian leader Mohamed Morsi.

On Tuesday, before a hastily arranged phone conversation with Mr Obama, Mr Netanyahu said if no deadline had been set for Iran’s nuclear programme, no country had the right to demand Israel hold its fire: “The world tells Israel ‘wait, there’s still time’. And I say, ‘Wait for what?’ Those in the international community who refuse to put red lines before Iran don’t have a moral right to place a red light before Israel.”

Mr Netanyahu has welcomed Canada’s decision to cut diplomatic ties with Iran, citing its nuclear ambitions, its support of terror and of the Assad regime.