Israeli Prime Minister Benjamin Netanyahu has told Sky News he will do “whatever we need to do to defend ourselves” against Iran – and diplomacy has failed to stop Tehran from developing its nuclear capabilities.

Speaking exclusively at the prime minister’s offices in Jerusalem, Mr Netanyahu rejected US attempts to resolve the growing crisis only through dialogue.

“I don’t think that diplomacy by itself will work. I think diplomacy can only work if it’s coupled with a credible military threat or the willingness to apply the military option if deterrence fails,” he said.

Iran is openly committed to destroying, repeating the Holocaust and destroying the six or seven million Jews of Israel and we’re not going to sit by, idly by and let them do it.

“(If) these Ayatollahs think that they could threaten us with a nuclear holocaust they’re wrong. We will do whatever we need to do to defend ourselves.”

During the interview, Mr Netanyahu sent a message to Saudi Arabia and Crown Prince Mohammed bin Salman as rumours of a peace deal between the countries continue to circulate.

“Our hand is extended to all Arab States and certainly to Saudi Arabia which is vitally important,” he said.

“We have great opportunities to advance the peace in our region, peace between our two countries, the wellbeing of our peoples. I think it would change history.

“I mean we have already made one historic turning point with the four peace treaties of The Abraham accords which Israel made under my leadership with UAE (United Arab Emirates), with Bahrain, with Morocco, with Sudan.

“Obviously Saudi Arabia would be a quantum leap forward because it’s the most influential Arab country not only in the Arab world I think also in the Muslim world, so it would fashion I think the possibility of ending the Arab-Israeli conflict, and I think that it would also help us solve the Palestinian-Israeli conflict.”

Mr Netanyahu was also challenged on domestic issues – including the controversial judicial reforms that have divided Israel and seen 22 continuous weeks of mass protests.

He was forced to halt the process after the country came to a standstill following his sacking of the defence minister, who was later quietly reinstalled. Compromise negotiations are now taking place to find an agreement.

“It seems to me we have a situation where there is now a fairly broad majority that says we have to reform our judicial system, but the question is how much and how fast? And that is something that I decided in the wake of ensuing months to try and get a consensus,” he said.

“I’m not sure we will get one. We have to bring it into a happy middle, it’s going to be very hard because it’s extremely politicised and often misrepresented.”

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The proposed reforms have attracted public criticism from international allies, including the US. President Joe Biden openly chided the Israeli leader, saying to the American media in March “they cannot continue down this road”.

There has been a significant impact on Israel’s economy, with investors spooked by the proposed reforms – the shekel has fallen by about 5.5% against the dollar, investment in the prided tech industry is down 70% in the first quarter of 2023 compared with 12 months ago, and the credit ratings agency Fitch recently warning Israel that its A+ rating was at risk.

Mr Netanyahu dismissed the concerns: “I don’t think the economy is the problem, I think political consensus is the problem.

“There’s a vast misrepresentation about what we’re doing, everybody’s adding to it, saying we’re going to take away the independence of the court – no we’re not. I’m not going to let that happen.

“It’s important to understand Israel’s economy is very powerful and it’s going to remain powerful because it’s a high tech economy in a high tech world.”

2023 has been one of the most violent years between Palestinians and Israelis for decades, including a recent conflict between the Gaza-based Islamic Jihad militants and Israel that lasted five days.

Additionally, the Netanyahu government has approved the building of about 7,000 new settlement homes in the occupied West Bank since the start of the year, a practice considered illegal under international law and by most governments.

The prime minister described as “completely false” a recent statement by the US State Department condemning the building of a Jewish religious school on West Bank land as “violating Israel’s commitment to the Biden administration”.

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“For God sake, this is the land of Israel, it’s our country, so I completely disagree with that, but I think one thing is true – the Palestinians are here and we’re not going to push them out, we’re here and they’re not going to push us out.”

Mr Netanyahu did however commit to preserving the fragile ‘status quo’ at the holy Muslim site in Jerusalem, al Aqsa Compound, known to Jews as The Temple Mount, despite a recent visit by his far-right nationalist interior minister, Itamar Ben Gvir.

“The Temple Mount the status quo sacrosanct, we’re not changing it. I don’t care what anybody says, we’re keeping the status quo and ultimately overtime people will judge it and they will see it hasn’t changed, and won’t change,” he said.