Israel has intensified its assault on Gaza, as Palestinian militants continue to fire rockets into Israel on the fifth day of hostilities.
Israel's military said air and ground forces were involved in attacks on Friday but had not entered Gaza.
Video from Gaza City showed the night sky lit up by explosions from Israeli artillery, gunboats and air strikes.
More than 100 people have been killed in Gaza and eight have died in Israel since fighting began on Monday.
In a statement released early on Friday morning, Mr Netanyahu said the Israeli military operation against Palestinian militants would continue for "as long as necessary". He added that Hamas, the Islamist group that rules Gaza, would pay a heavy price, as would other "terrorist groups".
A Hamas military spokesman said the group was ready to teach Israel's military "harsh lessons" should it decide to go ahead with a ground incursion.
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This week's violence in Gaza and Israel is the worst since 2014. It was initially fuelled by weeks of Israeli-Palestinian tension in East Jerusalem which led to clashes at a holy site revered by both Muslims and Jews. This spiralled into an incessant exchange of Palestinian rocket fire and Israeli airstrikes.
Meanwhile, Jewish and Israeli-Arab mobs have been fighting within Israel, prompting its president to warn of civil war.
Defence Minister Benny Gantz ordered a "massive reinforcement" of security forces to suppress the internal unrest that has seen more than 400 people arrested.
Police say Israeli Arabs have been responsible for most of the trouble and reject the accusation that they are standing by while gangs of Jewish youths target Arab homes.
