"I won't be too specific but all options are still on the table," Steinitz told reporters.
"We never limited Israel's right of self-defence because of some diplomatic constraints," he said.
Significant gaps remain between Iran and the P5+1 world powers on specific measures to end a 12-year standoff on Tehran's nuclear programme.
Two deadlines for a permanent agreement have already been missed, since an interim accord was struck in November 2013.
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It would be followed by a final deal setting out all the technical points of what would be a complex accord by June 30
Iran denies seeking an atomic bomb and says its nuclear programme is for peaceful energy purposes.
Steinitz said Iran has so far shown little or no flexibility on key issues such as uranium enrichment, destruction of related infrastructure and the fate of its Arak nuclear reactor and Fordow secret underground enrichment facility.
"The Iranians didn't move much... Therefore we are so disturbed," he said.
Steinitz said the agreement being thrashed out was "full of loopholes".
"If there is no agreement there is not agreement, but since we hear some optimism on both sides it seems to us that if there is an agreement by the end of March this means an agreement without Iran moving to significant progress."
"If this is the picture, how much can it change in one month?"
Yesterday, Prime Minister Benjamin Netanyahu admitted he has a "profound disagreement" with US President Barack Obama over the Iranian nuclear issue.
Washington and Iran are now seen as the key players of any potential deal.