"The (military) is ready both to defend and to strike," he said in a video statement on Sunday, citing intelligence.
"You will suffer disproportionate blows far greater than you can imagine."
Meanwhile, Netanyahu has drawn a rare rebuke from the Bank of Israel for suggesting in a TV interview on Friday the nation could use cryptocurrency to help shield its economy from any sanctions.
"There could be sanctions, and sanctions on banks, so you need to set up a bypass economy," he told Israel's Channel 10.
"There are currencies that can bypass (sanctions). We are also working on that."
Asked whether he was referring to cryptocurrency, he replied "very true," adding that blockchain technology was another possibility.
The Bank of Israel said cryptocurrencies can't serve as a route to bypass sanctions and political leaders should focus on policy that would render such measures unnecessary.
"The right course for Israel's economy is to preserve our economic relations with our main trading partners, and to focus on preventing sanctions and their negative impact on the economy," it said.
More than 100 economists, including former Bank of Israel officials, ex-central bank governor Jacob Frenkel and several Nobel laureates, signed a letter expressing alarm over the proposal.
"Netanyahu is knowingly leading the State of Israel toward boycott and international economic isolation, and all he has to offer the Israeli economy is a puzzling solution, one accepted in criminal organisations, that will not help in the slightest," they wrote.
Netanyahu's main rival in Tuesday's close election, Gadi Eisenkot, called the crypto plan "madness" and said he feared that the "BibiCoin policy" would drive companies abroad and undermine national security.
Opposition leader Yair Lapid also dismissed the idea.
"Netanyahu has gone off the rails ... He promises the citizens of Israel before these elections that they'll be standing in line for an hour and a half for bread, like in Russia and Iran," Lapid said.
Britain, France and Canada - some of Israel's traditional allies - last month said they would block imports from Israeli settlements in the West Bank in reaction to the Netanyahu government's settlement policy.
On Saturday, the Israeli military forced about 1200 Palestinians to leave their homes in Hebron, in the occupied West Bank, after a Palestinian gunmen killed two Israeli soldiers at a military checkpoint near the city.
Opinion polls have pointed to a potential stalemate in the election, with neither Netanyahu's ruling coalition nor an opposition alliance securing a governing majority in parliament.
The latest polls show Eisenkot, the leader of Yashar! (Straight!), defeating Netanyahu by a margin of only two to three seats.
On Sunday, Eisenkot told a campaign rally Netanyahu would "not hesitate to resort to lies or extreme measures to remain in power".
Some in Israel raised concerns the nation's longest-serving prime minister might be keen to attack Iran ahead of the vote in an effort to remain in office.
With AP and EFE
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