"I believe that the political means that are being used by the Europeans and the Americans to convince the Iranians to stop will not end in stopping them," Halutz told reporters.
"The Iranians are determined to get a nuclear capability. From Israel's viewpoint such a situation is unacceptable... We should be prepared for the worst scenario."
But referring to the possibility of a pre-emptive strike against Iran, Halutz said: "Alternatives (to diplomacy) are not being considered yet."
"The other pressure is physical pressure. The question is who will be the one to implement it. When will it happen? I am not going to answer that but there are options worldwide," he added.
The Europeans are involved in efforts to persuade Iran to abandon uranium enrichment, a process which can make both nuclear fuel and the explosive core of a weapon.
The United States and Israel accuse Iran of using a nuclear fuel programme as a cover for developing the atomic bomb, charges Tehran has consistently denied.
Asked when Iran may have nuclear weapons capabilities, Halutz said: "Enrichment is the next step in order to have all the ingredients to create a meal.
"But cooking will take a few years...it varies from three six years, unless they already have a warhead. Maybe they have something, no-one knows."
Prime Minister Ariel Sharon meanwhile reiterated his pldege that Israel would not allow Iran to come into possession of nuclear weapons and expressed hope that Tehran would soon be dragged before the UN Security Council over its nuclear ambitions.
"I hope that Iran will be brought soon before the security council and sanctions will be imposed against her so that the nuclear process will stop," the prime minister said at a press conference in Jerusalem.