Israel's leadership seeks to maintain the convenient reality of a neighboring region populated by only two types of regimes. The first type is regimes with a degree of dependence on the United States, which necessitates severe limitations on challenging Israel (including diplomatically). The second type is regimes that are considered beyond the pale by the United States and as many other global actors as possible, and therefore unable to do serious damage to Israeli interests.
Israel's leadership would consider the emergence of a third type of regional actor -- one that is not overly deferential to Washington but also is not boycotted, and that even boasts a degree of economic, political, and military weight -- a deeply undesirable development. What's more, this threatens to become a not-uncommon feature of the Middle East: Just look at Turkey under Prime Minister Recep Tayyip Erdogan, or Egypt before the July 3 coup, or an Iran that gets beyond its nuclear dispute and starts to normalize its relations with the West.
There are other reasons for Netanyahu to oppose any developments that would allow Iran to break free of its isolation and win acceptance as an important regional actor with which the West engages. The current standoff is an extremely useful way of distracting attention from the Palestinian issue, and a diplomatic breakthrough with Iran would likely shine more of a spotlight on Israel's own nuclear weapons capacity. But the key point to understand in interpreting Netanyahu's policy is this: While Obama has put aside changing the nature of the Islamic Republic's political system, Israel's leader is all about a commitment to regime change -- or failing that, regime isolation -- in Tehran. And he will pursue that goal even at the expense of a workable deal on the nuclear file.Also see Scott McConnell's "The Coming Love Affair With Iran."