The Times reports: Israel has begun thinking the unthinkable: that it will have to deal with a nuclear-armed Iran within a year.

In documents seen by The Times, Israeli officials have begun preparing scenarios for the day after a nuclear weapons test.

The move is a tacit recognition that Israel is backing away from its long-held position that it would do everything in its power – including mounting a military strike – to stop Iran acquiring nuclear capabilities.

Details of the war game, which was enacted by former ambassadors, intelligence officials and ex-military chiefs, emerged as the United Nations’ nuclear watchdog confirmed yesterday that Iran has begun producing enriched uranium in an underground bunker designed to withstand airstrikes.

The International Atomic Energy Agency said that it was monitoring the work at the Fordow facility, which is concealed in a mountain near the holy city of Qom.

The simulation exercise was conducted in Tel Aviv last week by the Institute for National Security Studies (INSS), a think-tank. Its conclusions suggest that a nuclear test would radically shift the whole power balance of the Middle East.