Bush said Iran funds terrorist extremists, undermines stability in Lebanon, sends arms to the hardline Taliban regime, intimidates its neighbours with alarming rhetoric and defies the UN by refusing to be open about its nuclear programme.

“Iran is the world’s leading state sponsor of terror,” Bush said in a speech about democracy that he delivered about midway through his eight-day West Asia trip, which began with a renewed push for an Israeli-Palestinian peace pact — an accord he said whose “time has come”.

Chiding US allies, who have withheld civil liberties, Bush said governments will never build trust by harassing or imprisoning candidates and protesters. But his rebuke was general, and he did not single out any US partner in the region for oppressive practices.

“You cannot expect people to believe in the promise of a better future when they are jailed for peacefully petitioning their government,” Bush said. “And you cannot stand up a modern, confident nation when you do not allow people to voice their legitimate criticisms.”

Bush’s speech, reprising the call for democracy in West Asia that he made in his second inaugural address, was delivered in one of the few countries in the region — the Emirates — where democracy has not been a vital issue.

In other countries in the region, especially Egypt, the fight between democracy activists and autocratic governments has been much more pointed and controversial.

The President lauded some democratic reforms among Arab nations. He urged the Arab leaders to show support for the fragile Iraqi government, open their societies and provide backing, and possible funding, to help make an Israeli-Palestinian agreement stick.

“Leaders on both sides still have many tough decisions ahead, and they will need to back these decisions with real commitments,” Bush said, “but the time has come for a holy land where Palestinians and Israelis live together in peace.”

He called on the Palestinians to reject extremists, although he did not specifically mention the Islamic radical group Hamas, which has gained control of the Gaza Strip.

“The dignity and sovereignty that is your right is within your reach,” Bush said in a direct appeal to the Palestinians.

On Iran, Bush is privately trying to allay the concerns of Persian Gulf allies nervous about Iran’s military might and spreading influence. Gulf allies are jittery after the January 6 confrontation between US and Iranian naval vessels off their shores, but seek assurance that Bush doesn’t want war. Any attack on Iran could bring retaliation against military bases on Arab soil or choke the lucrative oil trade through the Strait of Hormuz.

“Iran’s actions threaten the security of nations everywhere,” Bush said, calling on the Iranian government to make itself more accountable to its citizens.

“So the US is strengthening our long-standing security commitments with our friends in the Gulf, and rallying friends around the world to confront this danger before it is too late.”

Earlier Sunday in Bahrain, US Vice-Admiral Kevin Cosgriff told Bush that he took it “deadly seriously” when an Iranian fleet of high-speed boats charged at and threatened to blow up a three-ship US Navy convoy passing near Iranian waters. The Iranian naval forces vanished as the American ship commanders were preparing to open fire.

Meanwhile, Iran’s Foreign Ministry on Sunday accused Washington of trying to spread anti-Iranian sentiment in West Asia by claiming that Iranian boats threatened US warships in the Persian Gulf.

Iran has insisted its boats never threatened the US ships and that the incident was a normal occurrence in the Gulf waters.

Iranian Foreign Ministry spokesman Mohammad Ali Hosseini accused the administration of Bush of trying to stir up tensions in the Gulf.

“Some political factions in the US are pursuing adventurism to help Bush to spread Iran-phobia in the region,” Hosseini said.