Israeli officials would like the United States to take the lead in a military assault on Iran's nuclear sites, but say in private they would go it alone if necessary, describing a nuclear-armed Iran as an existential threat to the Jewish state.
Speaking to foreign journalists, Netanyahu said Israel was sticking to the red line he laid down in September, when he told the United Nations Iran should not have enough enriched uranium to make even a single warhead.
"I made clear that once Iran crosses that enrichment threshold, the chances of us effectively stopping Iran's nuclear weapons program would be reduced dramatically," he said.
"Iran is two and a half months closer to crossing this line and there is no doubt that this will be a major challenge that will have to be addressed next year."
Iran denies accusations by Israel, the United States and many Western governments that it is seeking to develop nuclear weapons, saying its ambitious nuclear program is for peaceful, civilian purposes.
Israeli experts have said Iran could have enriched enough uranium to produce just one bomb by the spring or summer of 2013. In an effort to deter Tehran, Western powers have imposed increasingly tough economic sanctions on the Islamic Republic.
"The sanctions on Iran are hurting the Iranian economy. There is no question about that. But we have not seen any evidence that sanctions have stalled Iran's nuclear weapons program," Netanyahu said.
"Israel is more capable of addressing this challenge than it was when I took office four years ago," said Netanyahu, who looks on course to win re-election in a January 22 national ballot.
Israel has one of the largest air forces in the world and is believed to have the Middle East's only nuclear arsenal.
Iran's nuclear facilities are well protected and dotted around the vast country, posing a massive challenge to the Israeli military which does not have the reach of the United States or as powerful conventional munitions.
(Reporting by Crispian Balmer; editing by Andrew Roche)