Israeli Foreign Minister Avigdor Lieberman says Israel should shift its focus from the Palestinian issue to "the biggest problem", Iran.

Defending the Israeli government's opposition to the peace process, Lieberman said Israel is working "with determination" on the issue and has made an attempt to change the subject by bringing up the "Iran issue".

"The biggest problem isn't the Palestinians, but the Iranians," Lieberman said.

"From their ballistic missiles, nonconventional weapons and nuclear program, to their involvement in Lebanon and Gaza, Iran poses a much graver threat to Israel than the Palestinians do, and the focus should be moved from the Palestinians over to Iran," added the Israeli minister.

The push by Lieberman to shift focus to Iran came after US Vice President Joe Biden warned Israel on Tuesday against any military action on Iran.

Biden said the government of Israeli Prime Minister Benjamin Netanyahu would be "ill advised" to try to strike Iranian nuclear facilities.

Earlier on Tuesday, Israel carried out a successful test of its Arrow II antimissile system, said to be designed for use against Iran and its ballistic missiles.

The Arrow 2 anti-ballistic missile system is capable of intercepting and destroying any Iranian missiles, even if they were to carry nuclear warheads, a high-ranking officer in the Israel Defense Forces told the Jerusalem Post.

"We will shoot all of [Iranian missiles] down," he told JPost. "The Arrow knows how to intercept the Shahab missile."

During his election campaign, Netanyahu said he would not tolerate a nuclear-armed Iran.

"I promise that if I am elected, Iran will not acquire nuclear arms," he said, "and this implies everything necessary to carry this out."

Netanyahu also struck a chord with voters who mistrust peace with Palestinians and promised to spurn any US attempt to negotiate the creation of a Palestinian state in the West Bank or Gaza.

He repeatedly articulated the anxieties of voters - such as Beit Aryeh inhabitants -- whose settlement is built on land occupied by Israel after the 1967 war.

Under the peace agreement proposed by the United States, the occupied lands will be returned to Palestinian rule.

Following reports that Barack Obama's administration is gearing up for a "clash" with the hawkish Israeli government over its refusal to support the two-state solution, Lieberman said Israeli will "formulate the policy compatible with our world view and as the voters wanted in the elections."

Lieberman added in his address to the Yisrael Beiteinu Party that "We have never interfered in the affairs of others, and we expect from others that they not interfere in ours."

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