A senior Israeli military intelligence official warned Wednesday of a heightened threat of conflict on Israel's borders in the next two years as a result of "escalation" in the region.

In a briefing to foreign journalists at the defence ministry in Tel Aviv, the official also said Israel would likely "have to" target civilian areas in Lebanon in a future confrontation with Hezbollah, given its distribution of weapons sites.

The official's warning came after a Hezbollah attack killed two Israeli soldiers in January, raising fears of another all-out war, and as Israel continues to rail against a full nuclear deal between world powers and arch-foe Iran.

"If we speak about a war that one country or one organisation will all of a sudden start against Israel, the probability is even lower than it was two or three years ago," said the official, who requested that his name not be used.

"But the probability for war as a result of escalation... or miscalculation is much higher than it was in the past, because of the situation of organisations around Israel."

The official referred specifically to Hezbollah, with whom Israel fought a month-long war in 2006, and Iran's arming of the group.

"The Iranian threat is a tangible threat to Israel. Iran has an aspiration to rule, to control the Middle East.

"One of the tools Iran uses in order to implement this policy is Hezbollah," he said.

The official added that a nuclear deal with Iran allowing the Islamic republic to prosper economically would likely lead to more funding of its proxies in the region, such as Hezbollah.

World powers are conducting sensitive negotiations with Iran aimed at preventing it from developing nuclear weapons, in exchange for an easing of punishing economic sanctions.

The army official warned that in a future conflict with Hezbollah, Israel would "have to" target civilian areas.

He said Hezbollah currently possesses more than 100,000 rockets hidden in civilian areas in Lebanese villages that could hit northern Israel, including "hundreds" which could reach anywhere in the Jewish state.

"Each (village) is a military stronghold. Next time we have a war with Hezbollah, we will have to attack each one of these targets, and we hope the population will not be there," he said.

Israel is still reeling from a report by an army veterans NGO earlier this month which alleged the military acted with disregard for civilian casualties during its July-August conflict with Islamist movement Hamas in the Gaza Strip.

The military has opened investigations, including into deadly incidents where the army shelled UN schools.

So far, it has charged three soldiers with looting during the war that killed 2,200 Palestinians, mostly civilians, and 73 on the Israeli side, mostly soldiers.

The Palestinians are preparing to sue Israeli officials through the International Criminal Court for alleged war crimes during the conflict.