Netanyahu, who spoke at the annual Herzliya Conference, also addressed the ongoing IDF operation in the Gaza Strip and the West Bank, saying that should Israel withdraw its forces from the West Bank, Iran might swoop in.
"We cannot allow for Iran to form any base of operations near the Tel Aviv metropolitan area," he said.
Israel, he added, should change its strategy in Gaza as well: "We were wrong to be led down a path of attrition warfare… we have to convert to a strategy creating mass deterrence, which will eventually bring the downfall of Hamas.
"The rapid withdrawal of (Former Prime Minister Ehud) Barak's government from Lebanon (in 2000) encouraged the forming of an Iranian base of operations in the north and the pullout from Gaza created another pro-Iranian one," he added.
"Thousands of rockets have rained down on Israel since and anyone can see this policy has failed."
The negotiations with the Palestinians, continued the opposition leader, are failing not because of a land dispute, but because "those who were our enemies remained so and still object to an independent State of Israel anywhere near their borders."
Netanyahu, it seems, holds a different view as to the way peace can be achieved: "The tragedy of the negotiations is not the lack of political horizon or generous offers, but the lack of partner – the Palestinians cannot produce a partner (leader) who wants and can bring peace to his people.
"I suggest we try another way, the way of financial peace, which can lead the way to future political peace and prevent the future recruitment radical militants," he added.
"I would like to create a different reality, of peace and hope for the Palestinian people," he concluded.