Israeli Prime Minister Benjamin Netanyahu said Tuesday that Iran's atomic drive "will be stopped", a day after an interim agreement bringing sanctions relief for Tehran took effect.

"Iran's military nuclear programme must be stopped, and Iran's military nuclear programme will be stopped," Netanyahu said at a joint news conference with his Canadian counterpart Stephen Harper, without saying how.

Israel has long warned that a nuclear Iran would pose an existential threat to the Jewish state, and has refused to rule out a military strike to prevent that from happening.

Netanyahu fought a major diplomatic campaign against the so-called Geneva Agreement which was hammered out in November between world powers and Iran, and on Monday he said the agreement would not succeed in stopping Tehran.

"The interim agreement which went into force today does not prevent Iran from realising its intention to develop nuclear weapons," he told the Israeli parliament.

His remarks came just hours after the UN nuclear watchdog confirmed Iran had halted production of 20 percent enriched uranium, marking the entry into force of the landmark deal with the P5+1 group of world powers.

The international community also kept its part of the deal, with both the European Union and United States separately announcing they were easing crippling sanctions on Iran.

The deal, which was signed in Geneva, came about after nearly a decade of failed negotiations over its disputed nuclear programme, which the West believes is a front for building a military capability.

Tehran has denied the charge.

"A nuclear armed Iran would not just endanger Israel -- it would threaten the peace and security of our region," Netanyahu said on Tuesday.

"It would give Iran's terrorist proxies a nuclear umbrella.

"It would launch a multilateral nuclear arms race in the Middle East, it could turn the Middle East into a nuclear tinderbox," he said.

Netanyahu said the Iran nuclear issue, and the rise of Islamism across the Middle East, had united Israel and many Arab countries in their efforts to face these "twin challenges".

"Iran's pursuit of nuclear weapons and the aggressive designs of the Muslim Brotherhood is what shapes many of the Arab world's leading countries today," he said.

"In meeting those twin challenges, these countries do not see Israel as their enemy but as being on the same side of a difficult conflict," he said.

Commentators say the diplomatic effect of direct talks between Israel's sworn enemy Iran and Western powers could see the Jewish state finding more in common with traditional Arab allies of the US, particularly Sunni Gulf kingdom Saudi Arabia.