Israel is launching a campaign to isolate Iran economically and to soften up world opinion for the option of a military strike aimed at crippling or delaying Tehran's uranium enrichment programme.

Pressure will be applied to major US pension funds to stop investment in about 70 companies that trade directly with Iran, and to international banks that trade with its oil sector, cutting off the country's access to hard currency. The aim is to isolate Tehran from the world markets in a campaign similar to that against South Africa at the height of apartheid.

Meanwhile, President Mahmoud Ahmadinejad is to be pursued in international courts for calling the Holocaust a myth, and saying Israel should be wiped off the map. The case will be launched under the 1948 UN convention on the prevention and punishment of the crime of genocide, which outlaws "direct and public incitement to genocide".

Before flying to London to spearhead the mission to sell the sanctions, the Likud party leader, Binyamin Netanyahu, said: "A campaign to divest commercial investment from Iran, beginning with the large pension funds in the west ... either stops Iran's nuclear programme or it will pave the way for tougher actions. So it's no-lose for us."

In December the UN ordered a ban on the supply of materials that could contribute to Iran's nuclear and missile programme, and an asset freeze on Iranian companies and individuals. But it stopped short of a full travel ban.

Israeli defence sources claim that Iran is close to the point of no return in its uranium enrichment programme using gas centrifuges.

A senior official said: "They currently have problems but if the programme is allowed to continue without interruptions we estimate they will have mastered the technology this year. We expect a declaration from them in the next month, possibly on February 21, the day of the Islamic Revolution, that they have reached significant achievements.

"It will be a bluff, but it will have the potential of marketing Iran as a regional superpower. If they do it, a nuclear Iran will cast a long shadow over the whole of the Middle East; we will have Hizbullastan in Lebanon, Hamastan here, and Shiastan in Iraq."

Military analysts speaking at an annual conference in Herzliya, near Tel Aviv, claimed that Israel was facing an "existential threat" from the Iranian uranium enrichment programme, which Tehran has consistently claimed was for a civilian nuclear fuel cycle. The only division of opinion was over the imminence of this threat.

Commentary: