He said Iran continues to flout the United Nations and world leaders by pushing forward with work on its nuclear program - including, he said, work on a nuclear weapon. But he said Iranian leaders would be making a costly mistake in believing the threat of military action is an empty one.
"You cannot provoke the world, assuming the world is made of fools only," Peres said.
His comments come at the start of talks in Moscow between Iran and the group of nations that have taken the lead on the issue: the United States, France, Britain, Russia, China and Germany. Peres is not attending the meetings.
The International Atomic Energy Agency and Western leaders have expressed concern about Iran's nuclear effort, including its uranium enrichment program and possible work toward a nuclear weapon. Iranian leaders have repeatedly said the work is purely peaceful.
Previous rounds of talks have failed to result in any agreement.
Peres said Western leaders should remain united on the issue and called for the United States to assume the role of "elder statesman" in reaching a solution. He endorsed the strategy of exhausting non-military options, including sanctions, against Iran.
But he said there must be a credible threat of a military strike for those options to be successful.
"If the Iranians will understand seriously that this is an option, maybe we shall not need it," he said. "If they think this is a bluff, then it may lead to a war."
"For that reason, the warning must be credible, the sanctions must be credible," he said. "So let's first of all use the non-military means, indicating to the Iranians, 'Gentlemen, better you agree with a non-military confrontation than look for other options.' "
Iran has pressed for the removal of sanctions, including a ban on oil exports that appears to be exacting a serious toll on Iran's economy. U.S. and other officials have said sanctions must stand.
Here is the exchange:
Elise Labott: World powers are meeting with Iran in Moscow. Are you expecting anything from these talks or is it a waste of time? Is Iran playing for time?
Shimon Peres: I am not sure that something will happen there for two reasons. A) the Iranians think this is just a warning, That people are not serious enough. And the second is they believe can introduce a split in the coalition that President Obama has built. I don’t think it will happen because the danger is uniting, not the policy. Iran is a real danger
Labott: Do you think the military threat is credible enough?
Peres: If the Iranians will understand seriously that this is an option, maybe we shall not need it. If they think this is a bluff, then it may lead to a war . For that reason, the warning must must be credible, the sanctions must be credible. So let’s first of all use the non-military means, indicating to the Iranians, "Gentlemen, better you agree with a non-military confrontation than look for other options."
Labott: How long do they have?
Peres: I think time is out because they continue to build the bomb. They continue to do things which are contrary to the UN provisions, to the atomic center of Geneva. They build, the provoke. The continue to enrage the Iranians. You cannot provoke the world assuming the world is made of fools only.
Labott: So time is out you are saying, this is it?