US President George W Bush and Malaysian Prime Minister Abdullah Ahmad Badawi agreed Thursday on the need to end the Iranian nuclear crisis through diplomacy, the White House said.

Predominantly Muslim Malaysia is the current chair of the 57-nation Organisation of the Islamic Conference, the world's biggest Muslim grouping.

Bush spoke on the Iranian issue and other global problems by telephone with Abdullah, who is attending the World Congress on Information Technology in Texas.

"The two leaders discussed Iran and agreed on the importance of finding a diplomatic solution to the nuclear issue," Bush's spokesman Scott McClellan told reporters.

"They agreed on the need for the regime in Iran to come into full compliance with its international obligations," he said.

The two leaders spoke as the UN Security Council on Thursday mulled a binding Franco-British draft resolution demanding a halt to Iran's sensitive nuclear program.

Denial by Tehran

The draft invokes Chapter 7 of the UN Charter - which can authorize economic sanctions or even military action as a last resort in cases of threats to international peace and security - and needs at least nine yes votes and no veto from any of the council's five permanent members to pass.

The United States, France and Britain fear Iran is trying to build a nuclear arsenal under cover of its nuclear energy program, though Tehran denies this.

Bush and Abdullah also discussed their shared concern about high energy prices and the importance of promoting alternative sources of energy, McClellan said.

Another topic of discussion was the Israeli-Palestinian issue and "they reiterated the importance of a two-state solution," he said.

Malaysia has said it would not establish relations with Israel until the Palestinians secure statehood.