Scott Morrison has described suggestions Australia could join the United States in potential military action against Iran as premature.
President Donald Trump has not asked for a commitment from Australia on joining an attack against Tehran as heightened tensions between the US and Iran threaten to spill into a full-blown conflict.
Mr Morrison confirmed he discussed the nuclear deal at the heart of the dispute with Mr Trump on Thursday night, but said talks didn't extend into what role Australia could play if the situation deteriorated.
"We are nowhere near that stage," the prime minister said.
"But there is a clear objective here from the US, which we will support, and that is to get them (Iran) back to the table, to get a tighter set of controls and conditions in place.
"That is good for more peace and the stability of the region."
Mr Morrison criticised the deal but avoided going as far as Mr Trump who has previous labelled the agreement "disastrous".
"I have had my reservations about that arrangement but, frankly, it is better than anything else that is out there," the Australian leader said.
"The greatest criticism is that it is quite limited in what it seeks to do and leaves open a lot of activity for Iran."
Earlier, Mr Morrison told the ABC he would consider any future request from the US "seriously and on its merits".
The US is urging Australia to toughen its stance on Iran and play a key role in a new "global coalition" against the regime.
US Secretary of State Mike Pompeo has called on Canberra to partner with the Trump administration to boost pressure on Tehran.
"I think Australia is an important player here," Mr Pompeo told The Australian.
"I think they carry a lot of weight in the sense that they, like many nations, suffer from the fact the world's largest state sponsor of terror continues down the path of building its missile program in a way that threatens not only the Middle East but the entire world."
Trade Minister Simon Birmingham says Australia continually reviews and updates its sanctions.
It believes its Iran sanctions are up to scratch but is keeping an eye on what the US does next.
"Our belief is that to date the economic sanctions we've put in place are fit for purpose," he told ABC Radio National on Friday.
"But we're looking closely at what additional steps the United States is taking and whether that mandates or warrants any change in the economic sanctions that we already have in place."
