Israeli Prime Minister Benjamin Netanyahu welcomed reports Monday that world powers had failed to strike a deal with the Jewish state's arch-foe Iran on its controversial nuclear programme.

Speaking before Tehran and the five permanent members of the UN Security Council plus Germany decided to give themselves seven more months to reach an agreement, Netanyahu said such a result would be "better".

The world powers and the Islamic republic will now seek to agree an outline accord by March 1 and to nail down a full technical agreement by July 1, officials in Vienna said.

"This result is better. A lot better," Netanyahu told the BBC after hearing the initial reports that Monday's deadline for an accord would not be met.

"The deal that Iran was pushing for was terrible. The deal would have left Iran with the ability to enrich uranium for an atom bomb while removing the sanctions," he said.

The West wants uranium enrichment in Iran dramatically reduced, while Tehran wants painful UN and Western economic sanctions lifted.

Israel has long opposed negotiations between Iran and the so-called P5+1, and has threatened military action to stop Iran gaining a nuclear weapons capability.

"Israel always, always, reserves the right to defend itself," Netanyahu said.

Iran and the United States, Britain, France, Russia, China plus Germany have been negotiating since February to turn an interim accord reached a year ago into a lasting agreement.

Such a deal, after a decade of rising tensions, is aimed at easing fears that Tehran will develop atomic weapons under the guise of its civilian nuclear activities -- an ambition Iran has always denied.