U.S. Defense Secretary Leon Panetta has cautioned against military action on Iran’s suspected nuclear facilities, saying recourse to such a step could have unintended consequences for the region.

Panetta’s warning follows the release this week of a report by the nuclear watchdog International Atomic Energy Agency that says Iran may be carrying out secret experiments for the purpose of developing nuclear weapons.

According to a Voice of America report, the IAEA findings bolstered calls by some in Israel’s government who have been calling for an attack on Iranian nuclear facilities sooner rather than later.

Appearing at a joint conference with Joint Chiefs of Staff Chairman General Martin Dempsey, Panetta said he agrees with the assessment of his predecessor, Robert Gates, that a military strike would only set the Iranian nuclear program back by three years at most.

“You’ve got to be careful of unintended consequences here and those consequences could involve not only, not really deterring Iran from what they want to do, but more importantly it could have a serious impact in the region and it could have a serious impact on U.S. forces in the region,” Panetta told reporters at the Pentagon.

Iran borders several Middle Eastern, Central and South Asian nations including Afghanistan on the east and Iraq on the west, the two countries where the U.S. has has heavy deployment of military troops.

Instead, Panetta argued that the U.S. and its allies should toughen economic and diplomatic sanctions on Tehran to change its behavior.

Iran, which has been under stringent economic and diplomatic sanctions for the last several years, says its nuclear programme is for peaceful purposes, to generate civilian power.

In its latest report on Iran, the International Atomic Energy Agency (IAEA) said on Tuesday that it had information indicating Iran had carried out tests “relevant to the development of a nuclear explosive device”.

The IAEA, according to media reports, claimed the research includes computer models that could only be used to develop a nuclear bomb trigger. Tehran has condemned the findings of the IAEA as politically motivated.