President George W. Bush and visiting German Chancellor Angela Merkel said they will continue to take a diplomatic approach in dealing with Iran's defiance of international demands that it halt its uranium enrichment program. "What the Iranian regime must understand is that we will continue to work together to solve this problem diplomatically, which means they will continue to be isolated," said Bush, who has recently warned that a nuclear-armed Iran could lead to World War III. Bush and Merkel spoke at a joint press conference Saturday at Bush's Texas ranch, where the European leader arrived a day earlier for an overnight visit. Merkel said all members of the Security Council must be engaged on the issue and said that if talks with Teheran "do not yield any results, further steps will have to be made." "We need to think about further possible sanctions," she said through a translator, "and we do not only need to think about them but we need to talk and agree." Russia and China - two of the five permanent members of the UN Security Council - are blocking the UN from moving toward a third set of harsher sanctions against Iran. Bush dismissed a question about when patience with Iran would run out.