Speaking to the German Sunday paper "Welt am Sonntag," Steinmeier said that if Iran and six major powers failed to reach a deal, Iran's increasing international isolation could "result in an new arms race in a region that is already shaken by crises."

An agreement, on the other hand, would help bring the country back into the international fold and precipitate political reform that would benefit a young generation yearning for "contacts with the rest of the world, travel and more freedom," Steinmeier said.

As a second day of final talks got under way in Vienna, the European Union's top diplomat Frederica Mogherini also warned that the "security of the world is at stake," but expressed optimism that a deal was reachable.

"It is going to be tough... but not impossible. It is a matter of political will," she told reporters on arriving in Vienna ahead of a meeting with Steinmeier and his British, US and French counterparts.

'Big challenges'

British Foreign Minister Philip Hammond added his voice to the chorus of warnings, saying that it was important to achieve the right agreement.

"We still have very big challenges if we are going to be able to get this deal done," he told reporters.

"I have said many times before and I will say it again today: no deal is better than a bad deal."

The talks in Vienna also include Russia and China.

Diplomats are seeking to reach a deal to reduce Iran's uranium enrichment program and establish an international monitoring scheme of the country's nuclear activities ahead of a self-imposed June 30 deadline - though sources close to the talks say there is little chance of an accord by this date.

Contentious issues

If the proposed deal goes through, it would mean the lifting of economic sanctions imposed by the EU, US and UN amid international concerns that Tehran is developing a nuclear arsenal under the cover of a civilian nuclear program, something the Isamic republic has always denied.

Key sticking points remain Tehran's objection to nuclear inspections at suspect military sites, and differences on the pace and timing of sanctions relief.

Iran's Tasnim news agency has meanwhile reported that Foreign Minister Javad Zarif will return to Tehran on Sunday evening to consult with the country's leadership on these issues, returning the next day.

Zarif told reporters on Saturday that "hard work" still needed to be done.

tj/ng (Reuters, AFP, dpa)