WASHINGTON - President Bush got the world's attention this fall when he warned that a nuclear-armed Iran might lead to World War III. But his stark warning came at least a month or two after he was first told about fresh indications Iran had actually halted its nuclear-weapons program.

The new intelligence report released yesterday not only undercut the administration's alarming rhetoric over Iran's nuclear ambitions but could also throttle Bush's effort to ratchet up international sanctions and take off the table the possibility of preemptive military action before the end of his presidency.

Iran had been shaping up as perhaps the dominant foreign-policy issue of Bush's remaining year in office and of the campaign to succeed him. Now leaders at home and abroad will have to rethink what they thought they knew about Tehran's intentions and capabilities.

"It's a little head-spinning," said Daniel Benjamin, an official on President Bill Clinton's National Security Council. "Everybody's going to be trying to scratch their heads and figure out what comes next."

Critics seized on the new National Intelligence Estimate to lambaste what Democratic presidential candidate John Edwards called "George Bush and Dick Cheney's rush to war with Iran." Senate Majority Leader Harry Reid of Nevada, echoing other Democrats, called for "a diplomatic surge" to resolve the dispute with Tehran.

Jon Wolfsthal, a scholar at the Center for Strategic and International Studies, termed the revelation "a blockbuster development" that "requires a wholesale reevaluation of U.S. policy."

But the White House said the report vindicated its concerns because it concluded that Iran did have a nuclear-weapons program until halting it in 2003 and because it showed that U.S.-led diplomatic pressure had succeeded in forcing Tehran's hand.

"On balance, the estimate is good news," national security adviser Stephen J. Hadley said. He disagreed that the report showed that past administration statements had been wrong, noting that collecting intelligence on a "hard target" such as Iran was notoriously difficult. "Welcome to the real world," he said.

Hadley defended Bush's October reference to World War III and repeated it in a briefing, saying if the world wants to avoid an Iranian bomb and "having to use force to stop it with all the connotations of World War III, then we need to step up the diplomacy."

Critics should be careful not to dismiss the threat, Hadley added, pointing to Iran's continued enrichment of uranium. "I'm sure some people will use this as an excuse or a pretext for . . . flagging on the effort," he said. "Our argument is actually it should be just the reverse."

Other countries might not see it that way, though, and diplomats said the report may cripple U.S. attempts to win a third round of U.N. sanctions against Iran. Just two days earlier, Undersecretary of State R. Nicholas Burns met in Paris with British, French, Russian, Chinese and German counterparts to seek support for a new Security Council resolution.

"This has got to be a very serious argument to be used by opponents of a third resolution," said Bruce Riedel, a former senior official at the CIA, Pentagon and NSC now at the Brookings Institution. "It will say America's own intelligence community says Iran has halted its nuclear-weapons program four years ago."

The International Atomic Energy Agency, which was briefed on the report two hours before its release, saw the judgments as validating its own long-standing conclusion that there was "no evidence" of an undeclared nuclear program in Iran.

The administration understood how explosive the new conclusions would be and kept them tightly held. Hadley said Bush was first told in August or September about intelligence indicating Iran had halted its weapons program but was advised it would take time to evaluate. Cheney, Hadley and other top officials were briefed the week before last. Intelligence officials formalized their conclusions last Tuesday and briefed Bush the next day.

After its release, the administration abruptly canceled daily news briefings at the White House and State Department and dispatched Hadley to speak for the government. The White House also announced that Bush would hold a news conference this morning; aides said it was long planned but it would allow him to address the subject.