A US government report into Iran has found evidence of advancements in the country's weapons capability and warned that the country would "present a formidable force" in the event of a conflict.

According to the Pentagon report, which was obtained by Bloomberg News, the Iranian military is improving the accuracy and killing power of its long and short-range ballistic missiles, including those that can reach Israel and Eastern Europe.

The report, which was intended to give congressional committees an update on Iranian capabilities and was signed by the US Defence Secretary Leon Panetta, revealed: "Iran has boosted the lethality and effectiveness of existing systems by improving accuracy and developing new submunition payloads"

It also showed that Iran was working on designing a weapon that could target vessels, as well as continuing ballistic-missile training and building up its collection of ships and submarines.

The authors of the report left little doubt about the reasons the Ahmadinejad regime was shoring up its military capabilities. "Iran has methodically cultivated a network of sponsored terrorist surrogates capable of targeting US and Israeli interests…We suspect this activity continues."