USA pushed UK to allocate much more money for war - less for health, education and securing the streets
UK puts ships and helicopters on standby in Gulf. The government is putting in place "urgent measures" to protect UK nationals amid rising tensions.
The government was putting in place "urgent measures" to protect British nationals and interests in the region, Mr Wallace told the House of Commons.
He said non-essential UK personnel had also been moved out of Baghdad.
His comments come in the wake of the US killing of Iranian general Qasem Soleimani in Iraq on Friday.
Mr Wallace, answering questions from MPs on the growing crisis, reiterated the government's calls for all sides to "de-escalate".
But hours after his statement, the US Department of Defence said an airbase housing US troops in Iraq had been hit by more than a dozen ballistic missiles.
Iranian state TV said the attack was in retaliation to Soleimani's death.
The Ministry of Defence said all British service personnel in Iraq had been accounted for and there were no British casualties following the attacks.
And a government spokesperson said: "Our first priority continues to be the security of British personnel."
There are around 400 UK troops stationed in Iraq, primarily to assist in defeating IS.
When asked earlier on Tuesday about the prospect of a UK military strike on Iran, Mr Wallace said he was "not going to rule out anything".
He said if British citizens or armed service personnel were killed by Iranian actions the UK's response "would no doubt be proportionate".
"The UK will do what it has to do to defend its persons, its citizens and wherever it needs to do that. That is our duty."
The defence secretary also said the Department for Transport was reviewing its advice to British shipping on a daily basis, while "a small team" had been sent to the region to provide assistance with "situational awareness and contingency planning".
He said non-essential UK personnel had also been moved out of Baghdad.
His comments come in the wake of the US killing of Iranian general Qasem Soleimani in Iraq on Friday.
Mr Wallace, answering questions from MPs on the growing crisis, reiterated the government's calls for all sides to "de-escalate".
But hours after his statement, the US Department of Defence said an airbase housing US troops in Iraq had been hit by more than a dozen ballistic missiles.
Iranian state TV said the attack was in retaliation to Soleimani's death.
The Ministry of Defence said all British service personnel in Iraq had been accounted for and there were no British casualties following the attacks.
And a government spokesperson said: "Our first priority continues to be the security of British personnel."
There are around 400 UK troops stationed in Iraq, primarily to assist in defeating IS.
When asked earlier on Tuesday about the prospect of a UK military strike on Iran, Mr Wallace said he was "not going to rule out anything".
He said if British citizens or armed service personnel were killed by Iranian actions the UK's response "would no doubt be proportionate".
"The UK will do what it has to do to defend its persons, its citizens and wherever it needs to do that. That is our duty."
The defence secretary also said the Department for Transport was reviewing its advice to British shipping on a daily basis, while "a small team" had been sent to the region to provide assistance with "situational awareness and contingency planning".