On Sunday, Palestinian President Mahmoud Abbas suspended the U.S.-brokered peace negotiations with Israel, demanding an end to the offensive in the Gaza Strip, which has killed about 120 people in the past five days.
Israeli ground troops launched the offensive last Wednesday focusing on the town of Jebalya in the north of the small, crowded Palestinian enclave controlled by radical Islamist group Hamas.
Olmert told the parliamentary commission on defense and foreign affairs that the operation was "not a one-off."
"Everything is possible - aerial and ground raids, special operations - everything is up for discussion," he said
The premier said the situation in Gaza "clearly requires a different approach to that which we have been taking in the past few months."
He said the government's policy "is to strike Hamas, as they are not interested in reaching any kind of understanding, and to continue negotiating with the pragmatic elements of the Palestinian leadership. If we are able to continue negotiating while fighting terrorism, we will be able to attain our goals."
Despite fierce Israeli assaults, Hamas militants have continued rocket and mortar attacks on border towns in southern Israel, including Sderot and Ashkelon. Three rockets hit Ashkelon on Monday morning, according to Israeli rescue services, but no casualties were reported.
Israel responded with airstrikes targeting weapons manufacturing and storage facilities, Hamas headquarters and militia groups, killing four Palestinians, all of them Hamas fighters.