Texas Governor Rick Perry loomed large over a narrowing White House race on Sunday despite Tea Party darling Michele Bachmann’s victory in a key test that saw the first major Republican bow-out.

Mr Perry, a popular fiscal and social conservative, will pose a major challenge to both the ultraconservative Ms Bachmann and former Massachusetts governor Mitt Romney, a moderate who has until now led the polls.

Meanwhile Tim Pawlenty, a low-key former governor of Minnesota who was hoping for a crucial bump from Iowa’s Ames Straw Poll, dropped out after coming in a distant third behind Ms Bachmann and libertarian congressman Ron Paul. The poll is unscientific and nonbinding but widely seen as an indicator of who is best positioned to energise the party’s activist base and win the first batch of nominating contests early next year.

Mr Perry, who announced his candidacy as the Iowa poll was under way, can challenge Mr Obama where he is most vulnerable by pointing out that Texas has led the country in job creation despite the economic slowdown.

“The President of the United States has a pen, and it’s called a veto pen, and I will use it until the ink runs out if that’s what it takes to get the message that we’re not spending all the money,” Mr Perry said to cheers from the crowd, according to the Des Moines Register newspaper.

Mr Perry garnered 718 write-in votes, more than the 567 that went to Mr Romney, who was listed on the ballot but has focused on other states. Analysts said Mr Romney would enjoy the advantage of a months-long head start and experience in running a national campaign following his failed 2008 bid for the Republican nomination.

Ms Bachmann, meanwhile, must convince voters she has appeal beyond her conservative base – less than 17,000 people voted in the straw poll – which will be critical in defeating Mr Obama in the general election.