The opposition leader was speaking during a three-day conference on the future of the Jewish people, organized by the Jewish People Police Planning Institute (JPPPI).
"The first thing we have to do is foil the attempt to physically demolish the Jewish state. This is a problem that is linked to a global phenomenon," Netanyahu said.
"I have no doubt that militant Islam will ultimately lose the day, but Nazism was brought down too, and the question is what does it exact from us precisely," he added.
"The future of the Jews has been threatened in the past and is being threatened now by a fanatical movement that places Jew hatred in their front porch. And they're working to develop nuclear weapons to work out their particular antipathy," Netanyahu said, addressing Iran.
The Likud chairman said "all means" should be used to prevent Iran from gaining nuclear weapons, especially economic means, "but if they do not succeed, we'll have to consider stiffer measures," he added.
For in-depth coverage of Conference - Click Here
"Not only Iran, look at what is happening to Pakistan," Netanyahu said, adding that a Taliban revolution there would form an "immediate danger."
Outlining what he described as a "reverse Manhattan project," Netanyahu said Israel had to forge international alliances and penetrate public opinion abroad to emphasize the Iranian threat.
"A small country like Israel in the face of global assault needs alliances. But be prepared for the possibility that that front does not act," Netanyahu warned, adding that in such a case, it was up to Israel to act.
'Nuclear-armed Iran threatens Jordan'
Swiping at Prime Minister Ehud Olmert, Netanyahu added that the "Israeli government must be concerned with this survival, not with its own survival."
Netanyahu also attacked the policy of unilateral withdrawal, saying that it had created two Iranian enclaves, one in southern Lebanon, and another in Gaza. "It simply doesn't work," he said.
Netanyahu added that Israel had to approach the issue of peace "from a position of strength," saying that peace would only be possible after Israel's neighbors became convinced that there was "no hope" of destroying Israel.
"We will need in the forthcoming years in the world in which we are living, of missiles and nuclear weapons, vast expenditures for defenses on the land, air, sea... Ultimately, we will need to continue a sustained rapid economic growth" to pay for such defense, he added.
Casting a historical eye on Jewish history, Netanyahu said that Jews "did not develop a great capacity to see danger in time. We have great talents, abilities as individuals and a collective, but identifying dangers in time is not something we developed."
"Herzl wrote about the Holocaust over 30 times. This is why he began Zionism," the Likud chairman added.
"Israel has definitely identified Iran as an existential threat, there's no question about that. We each have to do what we can in the time we have left."
According to Netanyahu, "A nuclear-armed Iran threatens Jordan, the Gulf region, and could be emboldened to make military moves. Iran could be the first undeterrable nuclear power.
“You could easily get a fanatic messianic regime here that is undeterrable, and that is the great danger," he said.