Israel is preparing for the possibility of Iran acquiring nuclear weapons, the Reuters news agency reported Thursday. According to the report, Prime Minister Ehud Olmert has instructed his ministers to draft proposals on how to cope with a nuclear Iran. The report was later denied by a senior Prime Minister's Office official, Israel Radio reported. The agency quoted a source close to Olmert as saying there were "long-term ramifications to be addressed, like how to maintain our deterrent and military response capabilities, or how to off-set the attrition on Israeli society that would be generated by fear of Iranian nukes." Minister Ami Ayalon refused to discuss specific policy issues, but told Reuters that there was a need for a three-point strategy against Iran. "First, we must make clear that this is a threat not just to Israel, but to the wider world. Second, we must exhaustively consider all preventive options. And third, we must anticipate the possibility of those options not working," Ayalon said. According to foreign media sources Israel's defense strategy is based on the assumption that it is the only nation in the Middle East to possess nuclear weapons. Iran has denied accusations that it is after nuclear weaponry, stating that its atomic research was a means of acquiring nuclear energy capabilities. However, Iranian President Mahmoud Ahmadinejad has on numerous occasions called for Israel's destruction. Israel has supported international efforts to stop Iran's atomic development through UN Security Council sanctions, and several Israeli officials have also hinted that Israel could attack Iran's nuclear facilities if diplomacy fails. Reuters reported that Israel was developing its defense systems to fend off a possible Iranian attack. It added that Israel was constructing a fleet of German-made submarines which could possibly carry nuclear missiles, sending a clear message that there would be retaliation for any Iranian attack.