The threat of military strikes on Iran has upturned the quiet and comfortable lives once enjoyed by many Iranians, ushering in a new era of struggle and fear.

Like many Iranians, Maryam Sofi says the West and Iran are locked in a dangerous game. "I don't think we can know just yet if war will break out, but I am concerned for my family and my country," says university teacher Sofi, 42, a mother of two.

"I cannot sleep at night, thinking about destruction and bloodshed if Israel and America attack Iran."

The United States and Israel have not ruled out military action against Iran's nuclear facilities if diplomacy fails to resolve a dispute over a program they suspect is aimed at developing atomic weapons.

In Washington on Thursday, U.S. President Barack Obama said the United States was considering all options on Iran and would work with allies to prevent Tehran from acquiring a nuclear weapon.

"No options off the table means I'm considering all options," he said. Sanctions and diplomatic pressure still appear to be Washington's preferred course of action. But Israel has been sending mixed signals, unnerving Iranians.

Shouting above the clanking hammers of coppersmiths in Tehran's busy bazaar, nut seller Ali encouraged his customers to hoard his wares: "Buy and store! War is looming!"

Tensions with the West rose after hardline students stormed two British diplomatic compounds in Tehran last week in protest against new sanctions imposed after the U.N. nuclear agency suggested that Iran was pursuing nuclear weapons.

Britain closed its embassy and France, Germany, Italy and the Netherlands recalled their envoys.

The diplomatic exodus, swollen by some foreign businessmen based in Tehran, has heightened nervousness in the capital to a level not felt since the outbreak of war with Iraq in the 1980s, or the turmoil that preceded the 1979 Islamic revolution that toppled the U.S.-backed Shah.

"Foreigners are leaving Iran ... Isn't it obvious that they want to attack Iran?," said a teacher named Mina.

Jane Heshmatzadeh, 59, among many Western women married to Iranians, is torn between fear of attack and loyalty to Iran.

"My home is here. It's not easy to just walk away and leave everything behind," said the Swede, who has lived in northern Iran for 21 years since marrying an Iranian businessman.

And Iranians have been stoking their own fears with speculation about what would happen if war broke out.

"In case of an attack ... we will be imprisoned inside the country ... the borders will be closed," said Zahra Farzaneh, 82, whose son lives in the United States. "I will die without seeing my grandchildren again."

ATTACKS IN THE GULF

Tehran denies that its nuclear program is anything but peaceful. It says it is developing the technology to generate electricity, not to create an atom bomb.

Analysts say Tehran could retaliate against any military strike by launching hit-and-run attacks in the Gulf and by closing the Strait of Hormuz. About 40 percent of all traded oil leaves the Gulf region through the strategic waterway.

Iranian citizens, already feeling the impact of international sanctions, are starting to take precautionary measures. On social media sites such as Twitter and Facebook, exiled Iranians talk about their concerns, exchanging ideas about how to help their relatives in case of an attack on Iran.

"We have survived a revolution, the (Iran-Iraq) war ... Our people cannot tolerate another crisis," Mitra, and Iranian in Brussels, said on her Twitter page.

"It will be a terrible war ... After the first strike the country and then the whole region will turn into a war zone," said Hossein Alaie, a shopkeeper in central Tehran. "They will destroy everything. I am stockpiling goods and have told my relatives to do so."

Analysts say the closure of Western embassies, by cutting off communication channels, will complicate finding a diplomatic solution to the nuclear dispute.

ISRAELIS LESS PREOCCUPIED

Iran has warned Israel and the United States that Tehran's response will be tough should they launch a military strike.

But Israelis seem not to be worried about a possible conflict and life goes on as before. A December 1 poll by the Saban Center for the Middle East Policy at the U.S. think-tank Brookings found that 43 percent of Israeli Jews backed attacking Iran, while 41 percent opposed.

"Israeli people are divided among themselves. Just as there are fears of an attack, there are also no less heartfelt fears of not taking a preemptive strike at the proper time," columnist Israel Harel wrote in the Haaretz newspaper.

However, regularly scheduled siren tests are being carried out in different parts of Israel, a common phenomenon in a country whose southern areas often come under rocket attack from Palestinian militants in the Gaza Strip.

"One just sounded in Jerusalem and shoppers in the parking lot of the city's main indoor mall across the street didn't even break stride as they headed toward its entrance or their cars," a witness said.

But in Tehran, the heavy demand for hard currency reflected war jitters.

"People are converting any assets they can. Some are selling jewelry or withdrawing their cash from savings accounts and selling stock market shares to buy dollars," said Hamid, a currency dealer on a busy street in southern Tehran.

But fear was mixed with defiance. "America has economic problems and wants to resolve it by attacking Iran ... I am ready to sacrifice my blood for my country," said a member of the hardline Basij militia, who refused to give his name.

The cost of many basic necessities like bread, meat and transportation has shot up, sometimes by over 50 per cent in recent months, painful in a country where the average monthly wage is around $600. Despite sharply climbing prices, most grocery stores and markets are still well-stocked.

But many factories in Iran are facing closure because of deteriorating economic conditions, and hundreds of thousands of workers are have taken wage cuts, inflation is surging, and shortages are spreading.

"We do not have even enough money to buy staples let alone stockpiling them. I am very worried," said unemployed worker Ali Tavangar, 45, a father of four.