Israel's deputy defence minister on Wednesday urged the United States to sideline Middle East peace talks in favour of dealing with the Iran nuclear issue as a priority.

Danny Danon, a hardline member of Prime Minister Benjamin Netanyahu's Likud party, said that a peace agreement with the Palestinians was "wishful thinking" in the time frame set aside by the US administration.

"If I could speak to President Obama today, I would tell him, let's change the calendar," Danon told journalists in Jerusalem.

"In May 2014, which is basically in six months, he wants to finish the negotiations with the Palestinians, but ... to finish the conflict with the Palestinians by May 2014 is wishful thinking," Danon said.

"I would say, let's finish with the threat coming from Iran by May 2014, and then go to the negotiation table... with the Palestinians."

The direct talks, which are being held in Israel and the West Bank under a US-imposed media blackout, have been set to last nine months, and have so far yielded no concrete results.

Danon said stopping Iran from building a nuclear weapon was a far more urgent priority, and reiterated that Israel was willing to carry out unilateral military action against Tehran should diplomatic efforts by world powers fail.

"We cannot make a mistake regarding Iran. Israel is not in a position of making such a mistake," he said.

Western countries, along with Israel, suspect Iran's nuclear activities are aimed at military objectives, a claim Tehran vehemently denies.

But while the West has come to the negotiating table after diplomatic overtures from Iran's new President Hassan Rouhani, Israel has remained sceptical that such talks will bear any fruit.

Israel, the Middle East's sole if undeclared nuclear-armed power, wants Iran to meet four conditions before the sanctions are eased: halting all uranium enrichment; removing all enriched uranium from its territory; closing its underground nuclear facility in Qom; and halting construction of a plutonium reactor.

"If you will compare the US to Israel's approach regarding Iran, some people will say that we panic sometimes, but we have a very good reason to panic," Danon said.

"If Israel makes a mistake regarding Iran, it will be a fatal mistake. If the US will make a mistake regarding Iran, it will be a hard one, but it will not be fatal to the US," he added.

"We do keep all the options on the table, including the military option.

"If we see that we have no other alternative, we will do whatever it takes. We have proven it a few times," Danon said, referring to Israel's 1981 bombing of Iraq's Osirak nuclear reactor, and a strike on a Syrian nuclear reactor in 2007 which Israel never officially claimed responsibility for.

Danon acknowledged that Israel could only do limited damage to Iran's nuclear drive without US military support.

"There's a big difference (between) if Israel deals with the threat of Iran, or the US does it. You cannot compare the capabilities of the American army to (those of) the Israeli army," he said.