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"Iran remains the central challenge this year, and it is possible we’ll see the direction determined by the end of the year," the outgoing defence minister told members of the parliamentary committee on foreign affairs and defence.
Barak, who will step down when the new coalition government is announced later this week, used the opportunity to renew warnings that Iran is seeking to put its nuclear facilities out of reach of any military strike.
"The Iranian leader wants to reach the zone of immunity with a large and well-defended number of nuclear facilities," he said.
"He thinks the United States will have trouble in attacking in the future if he achieves these things."
Israel and much of the West suspects Iran is using its civil nuclear programme as a front for developing a weapons capability, a charge Tehran denies.
Israel, the Middle East's sole if undeclared nuclear power, has refused to rule out a pre-emptive military strike on Iranian installations if it becomes the only way to prevent the Islamic Republic from going nuclear.
Any military confrontation would become much more complex if Iran managed to build a weapons capability, he said.
"Dealing with Iran militarily today is complex, but any attempt to deal with it in the future, especially when it becomes nuclear, will be much more difficult," he said.
Barak also used the occasion to express his appreciation for new US Defence Secretary Chuck Hagel whom he met in Washington last week.
"I found a person who supports Israel's security," he said of Hagel, whose nomination to the top Pentagon job caused concern in Israel where some accused him of taking a hard line on the Jewish state.
Barak said such fears were unfounded, saying there was "an exaggeration" of the criticism heard about him in Israel.
Iran's nuclear ambitions will be one of the key issues up for discussion in Jerusalem next week when US President Barack Obama makes his first visit to Israel since being elected president in 2008.