Israel has poured scorn on the interim deal struck by Iran and six major world powers in Geneva, and pledged to safeguard its security interests.
Top Israeli officials said the deal will eventually allow Iran to press ahead with its nuclear weapons programme.
Speaking to Israeli Radio, foreign minister Avigdor Liberman said: "This brings us to a new reality in the whole Middle East, including the Saudis. This isn't just our worry. We've found ourselves in a completely new situation."
When pressed whether the nuclear agreement might eventually prompt Israel to carry out a military strike on Iran, Liberman said his country "would need to make different decisions".
Israeli Prime Minister Benjamin Netanyahu has held a cabinet meeting to discuss the strategic implications of the agreement for Israel. Netanyahu is also likely to speak to US President Barack Obama.
"Today the world became a much more dangerous place because the most dangerous regime in the world made a significant step in obtaining the most dangerous weapons in the world," Netanyahu told the cabinet meeting, adding that Israel has the right to defend itself.
Israel had already made it clear that any deal struck by Britain, China, France, Germany, Russia and the US with Iran would not be binding on the Jewish-majority state.
Other top Israeli officials have also condemned the agreement in strong terms, which could be interpreted as hinting at a possible military strike on Iran.
"You stand and shout out until you're blue in the face, and you try to understand why they're not listening. The world wanted an agreement. We also said that a diplomatic accord would be good. A diplomatic accord is certainly better than war, a diplomatic accord is better than a situation of permanent confrontation - just not this agreement," Finance Minister Yair Lapid told Israel's Army Radio.
Rohani and Khamenei Praise Accord
Meanwhile, Iranian president Hassan Rohani and the country's Supreme Leader Ayatollah Ali Khamenei have heaped praise on the agreement.
"This can be the basis for further intelligent actions. Without a doubt the grace of god and the prayers of the Iranian nation were a factor in this success," said Khamenei, according to the official IRNA.
Shortly after the announcement of the deal, Rohani, in a letter to Khamenei, wrote: "Your revolutionary children took the first step so strong to force the world powers to recognise the Iranian nuclear and enrichment rights, and the next steps will be even greater to protect our technological and economic advances."