“An aggressor nation or extremist group could gain control of critical switches and derail passenger trains, or trains loaded with lethal chemicals.
“They could contaminate the water supply in major cities, or shut down the power grid across large parts of the country,” he said.
Panetta used the speech to press for passage of stalled cyber security legislation, arguing that major firms would not share information with the US government to thwart digital threats without legal protections.
“Companies should be able to share specific threat information with the government without the prospect of lawsuits hanging over their head,” said Panetta, adding that the administration would safeguard civil liberties.
With a proposed budget of $3.4 billion, the US military's newly created Cyber Command is increasingly able to trace the origin of digital assaults, he said.
The new capability will serve as a deterrent to any potential cyber adversary, as the Pentagon will be able to track down the authors of an attack and “hold them accountable,” he added.
The Defense Department has the job of safeguarding military computer networks and supporting efforts by the Department of Homeland Security and the FBI to protect civil networks.
Speaking to an audience of business executives, Panetta cited an alarming “Shamoon” virus that recently hit networks at Saudi Arabia's state oil company Aramco, disabling more than 300,000 computers.
He called the sophisticated virus “the most destructive attack that the private sector has seen to date.”