* Israel will find hands tied by international Iran deal
* Relations with United States face renewed strain
* Palestinian peace talks could be impacted (Recasts)
By Crispian Balmer
JERUSALEM, Nov 8 (Reuters) - Israel's worst fears will be realised if a proposed deal by world powers goes ahead with Tehran, sharply curtailing Prime Minister Benjamin Netanyahu options in his campaign against Iran's contested nuclear programme.
The possible accord might not only tie Israel's hand in any future military action against Iran, but it could also have an unexpected knock-on effect and stymie U.S.-brokered negotiations between Israel and the Palestinians.
In a bitter outburst, Netanyahu denounced on Friday the contours of an Iranian agreement leaked to the media, once again putting himself in direct conflict with Washington.
"This is a very bad deal and Israel utterly rejects it," Netanyahu said as he headed into his third round of talks in just 48 hours with U.S. Secretary of State John Kerry.
"Israel will do everything it needs to do to defend itself and to defend the security of its people," he told reporters.
Tellingly, Kerry did not appear in public with the Israeli leader on Friday and instead flew off in silence to Geneva to join talks between Iran and six world powers, including Russia, China and the European Union.
Despite his veiled threat, Netanyahu would find it almost impossible to launch an attack on Iran should it clinch an initial deal to relax tough economic sanctions in return for a partial pullback of its large nuclear programme.
"I can understand why Netanyahu is so furious," said Giora Eiland, a former Israeli national security adviser.
"A unilateral military option would have no real chance now. Not because we can't do it, but because it would be seen as moving against the whole international community," he told Reuters. "That is something Israel cannot afford."
Many Western experts believe Iran is seeking to build an atomic bomb, something that Israel views as an existential threat. Iran says its nuclear programme is for civilian needs.
Israel has long feared that world powers would not back its demand for a full dismantlement of Iran's enrichment facilities before any rollback of sanctions. It has argued that this approach is the only way to ensure Tehran never builds a bomb.
"Netanyahu's worst nightmare is about to come true," said Ehud Yaari, an Israel-based fellow at the Washington Institute for Near East Policy. "This is not just Netanyahu. This is the position of everyone in the Israeli security establishment."