Olmert called the current Gaza Strip conflict a war that Israel was waging wisely, restricting its actions to pinpoint air bombings and localized ground raids in border regions.
He said he "very much recommends that we not get ourselves embroiled in operations and in [paying] prices that are disproportionate to the constraints we are dealing with."
"If we believe that we should do more, we will do more, but there is no need to inflame ourselves," Olmert was quoted by the Haaretz newspaper as saying at a closed meeting with a parliamentary commission on foreign affairs and defense.
According to Israeli assessments, there are about 20,000 militants in the Gaza Strip, many receiving regular financial and logistical support from abroad. In the last two years, Israeli military and secret services have killed about 1,000 insurgents.
Palestinian human rights groups said that in December 2007 alone a total of 64 Palestinians, most of them militants, had been killed by Israeli attacks on Gaza. Last year, Palestinian fighters killed 13 Israelis, compared with 24 in 2006 and 426 in 2002, when a wave of suicide bombings swept through Israel, which then retaliated by retaking areas earlier transferred to the Palestinians.
Israeli radio said on Monday that Israeli and Palestinian negotiators had launched the most serious peace talks between the sides in seven years, despite clear differences over what each aims to achieve.
It said the chief negotiators, Israeli Foreign Minister Tzipi Livni and former Palestinian prime minister, Ahmed Qurei, met in Jerusalem for initial talks intended to tackle the most problematic issues barring the road to peace - state borders, the fate of Jerusalem and the Palestinian refugees.
Israeli officials said Olmert was seeking a deal that would outline a "framework" for a future Palestinian state with implementation delayed until the Palestinians are able to ensure Israel's security.
Abbas wants a final peace treaty enabling him to declare a Palestinian state by the end of 2008.
Talks between Israelis and Palestinians have been stalled for almost seven years, with no progress made so far on key issues such as borders established before the Arab-Israeli War of 1967, Palestinian claims to east Jerusalem, the plight of Palestinian refugees, and Israeli settlements in the West Bank.
The Palestinians claim all of the West Bank and east Jerusalem, both seized by Israel in the 1967 war. Israel wants to keep parts of east Jerusalem and the West Bank.
