A giant mock newsreel showing the Statue of Liberty being blown up and the White House being bombed opened the world premiere of The Handmaid's Tale, an opera based on Margaret Atwood's novel, in Copenhagen three years ago. For the British premiere with the English National Opera tomorrow the images of the twin towers of the World Trade Centre, which were clearly visible in the original film, have been bleached out, but the rest of the reel remains.

What, in 2000, seemed a shockingly unimaginable introduction to a dystopian vision of an America in the grip of a totalitarian theocracy has gained a potency in the years since that could not have been anticipated. With conflict raging in the Gulf, the 45-year-old British theatre and opera director Phyllida Lloyd feels that Poul Ruders' powerful, moving work – hailed as a triumph by the critics at its unveiling in Copenhagen – feels even more relevant to the modern world than when Atwood's book was first published in 1985 (and shortlisted for the Booker prize).

The Handmaid's Tale tells the story of a professor in the year 2195 looking back to 2002, when a fundamentalist religious group seized power in the US and assassinated the president and all of Congress. A strict moral code was enforced where women were denied all rights and their role confined to childbearing. Pluralism and freedom of thought were eradicated. Anyone guilty of a second marriage or an affair was forcibly separated from their family and sent to an indoctrination centre – which is where we meet the heroine, Offred, destined, under this brutal regime, to become a walking womb for a childless couple.

Atwood based all incidents on real life in countries as diverse as Iran, China and Romania. "The Handmaid's Tale is a horrifying and horrifyingly possible vision of the future," Lloyd says, "and all the more possible does it seem now than it did when I first read it in the 1980s and since I directed it in Copenhagen."

She was in New York on 11 September 2001, directing the American version of her popular hit Mamma Mia, and was disturbed even then by the language of vengeance and right-wing hatred she heard on the airwaves. Conflict in the Gulf has only made things worse.

"What seems particularly potent is this fundamentalist, Old Testament rhetoric that is coming out of America and has been coming out of it in spades since Bush became president," she says.

The opera was written by the young Danish composer Poul Ruders for the Royal Danish Opera Company, its first new opera in 34 years. Atwood granted the rights because Ruders fervently declared that he wanted to do something he found relevant and if he could not do The Handmaid's Tale he would not do anything.

Lloyd was already an Atwood fan of long-standing and agreed to direct because the challenge was too great to ignore. "A new opera and one on this scale is a very rare occurrence. It's quite a privilege to be asked," she says. "And I think this is a thrilling piece of theatre. It's accessible and contemporary and I'd like to think that people who might feel a bit iffy about opera generally, and contemporary opera in particular, would be excited by it."

One final, not insignificant factor, was how strong the female characters in the work were. "One is always attracted to pieces of theatre with great roles for women," she says. "This is a fantastic opportunity for the ladies chorus and I like that. It's a chance for the girls to really get out there and kick ass and, goodness, do they have to do some extraordinary things, like giving birth. They have to carry out a public execution and at one point they kick a man to death. The men have a bit of a thankless task. They have to stand and sing Latin."

The enormous scenes of ritual are something Lloyd feels where opera comes into its own and where she clearly revels in the vast resources to hand. While she pared the cast in her current National Theatre production of The Duchess of Malfi to the minimum, she admits to loving the possibility in opera of having 60 to 100 people on stage and a similar number in the pit.

"I love the scale of the medium," she says, "and the kinds of power, passion, hysteria that can be unleashed by that number of people." It seems strange, she adds, that when you are directing on the main stage at the National, you might have just three musicians.

But that is not to say that working in opera is easier. English National Opera has been in well-publicised turmoil over proposals for 100 redundancies that management believe are necessary to secure its financial future. The changes have been an unhelpful backdrop. "The combination of the outbreak of war and what feels a little bit like the tactics of shock and awe that are being unleashed on ENO by powers that be have made this a very emotional rehearsal period," Lloyd says.

People were being made redundant every day. Her "talented and fearless" chorus were working their socks off but had a strike planned for the first night, because they knew that was their best bet of getting their objections to job cuts heard. Lloyd says she was just "very relieved" when her singers' dispute was resolved with days to go – though other strikes at ENO remain possible.

Lloyd loyally describes the ENO company as a "brilliant collaborative machine". She must have considerable faith, given that she will be spending the next few years of her life with the company directing Wagner's Ring cycle. But she also admits she fears for its future. "I'm fearful for opera in English [ENO's raison d'être] and I'm anxious that less adventurous choices will be made in repertoire." Yet she is buoyed by the recent appointment of Sean Doran as artistic director, fresh from the Perth Arts Festival. "He's taken risks in the past."

In the long term, she believes, a much bigger problem facing the company is the question of the venue, which is currently undergoing a major refurbishment. Lloyd, a passionate defender of opera sung in English, thinks ENO is probably in the wrong auditorium to make the words audible. "We might be in a theatre a little too large," she says.

But she has much more pressing short-term worries. She is concerned about the technical problems involved in rehearsing on a set that has to be regularly dismantled for other performances. She worries about her singers, comparing them to highly-strung horses on the eve of the Derby. And she hates having the backdrop of war, which she strongly opposes. Her hope is that this opera, which examines what happens when people condemn without understanding, might make some small contribution to the debate but would not be so ridiculous as to suggest theatre might stop the war.

Thankfully, the one thing she does not have to worry about, probably, is Margaret Atwood. Although the Canadian novelist is known for being forthright in her views, she has gone on public record as having been "in thrall" at the world premiere, which was greeted with foot-stamping and deafening euphoria. Phyllida Lloyd will be hoping the first night in Britain receives the same.

'The Handmaid's Tale' opens tomorrow at 7.30pm at the Coliseum, London WC2 (020-7632 8300) and runs to 2 May