The Israeli position is clearly explained by President Shimon Peres in an interview:
The problem is the following: If we would say only economic sanctions [will be imposed], then the Iranians will say, “Okay, we will wait until it will be over.” Now what the Americans and Europeans and Israelis are saying is, “If you won’t answer the economic challenge, all other options are on the table.” It will not end there. Without that, there is no chance that the sanctions will [work]….The Iranians must be convinced [the threat of a military attack] is not just a tactic.
Dagan was also right in saying that Iran’s influence is waning in the Middle East. The last year has been a disaster for Tehran’s regional ambitions. With Sunni Islamists in the ascendancy throughout most of the Arab world, these countries and movements have no need for Iran.
The Palestinian Hamas group will take Tehran’s money, but it is now in the orbit of the Muslim Brotherhood that is going to be controlling Egypt. Iran’s influence is thus limited to competing in Lebanon (where its Hizballah ally is in a strong position), Iraq (where its influence is real but limited), Syria (where its ally is under sharp attack by rebels), and Bahrain (where it backed the losing side).
Thus, while Tehran getting nuclear weapons in, say, 2010 would have had a dramatic effect in boosting its regional power, that is no longer true today and will be less so in the future. There are certainly shortcomings in Western thinking: How can the United States contain Iran when its leadership’s willpower and courage is not taken seriously in Iran, Arab capitals, and Israel? And since containment is defined so narrowly, only in terms of blocking an Iranian launch of nuclear missiles, how can you counter Iran’s — albeit more circumscribed — ambitions?
Iran’s moment in the region as a whole is over, though it can still do a lot of damage in the Persian Gulf area. But we are now about to enter a new era in which Egypt, under Sunni Islamist leadership, has the option of playing the leading role. The last round of such Egyptian activity began almost precisely sixty years ago today with the Arab nationalist coup of July 23, 1952. Today it is revolutionary Islamism that is sparking likely efforts from Cairo to promote revolution abroad and to make some futile new effort to wipe out Israel. The new regime’s first priority, though, is going to be consolidating power at home and fundamentally transforming Egyptian society.