Israeli Prime Minister Benjamin Netanyahu has been caught by a live microphone railing against the European Union's "crazy" insistence on resolving the Israeli-Palestinian conflict as a precondition for closer ties with the 28-state bloc, while trumpeting Israel as essential to its prosperity and survival.

Mr Netanyahu was meeting with leaders of Poland, Hungary, the Czech Republic, and Slovakia at a regional summit, where a conversation with his Czech and Hungarian counterparts discussing Iran, Syria, the Islamic State group, and EU-Israel relations was accidentally broadcast to journalists covering the conference.

The Israeli premier was overheard blasting the European Union's approach to Israel, saying "it's crazy, I think it's actually crazy", that the EU maintains that resolving the Israeli-Palestinian conflict must come before closer trade ties.

"There is no logic here. Europe is undermining its security by undermining Israel," Mr Netanyahu said.

"Europe is undermining its progress by undermining the connection with Israeli innovation because of a crazy attempt to create conditions [for peace with the Palestinians]."

European ties with Israel would determine whether the 28-member union would "live and thrive or shrivel and disappear," he added.

Mr Netanyahu also made a rare public admission that Israel struck Iranian arms convoys in Syria bound for Hezbollah "dozens and dozens of times".

The EU — in accordance with international law — does not recognise Israeli sovereignty over territories it captured in the 1967 Arab-Israeli War, including the West Bank and east Jerusalem, where the Palestinians hope to establish a state.

It has been a vocal critic of Israel's settlement construction and has adopted measures mandating the labelling of goods produced in West Bank settlements.

"The European Union is the only association of countries in the world that conditions the relations with Israel — that produces technology in every area — on political conditions. The only ones. Nobody does it," Mr Netanyahu said, citing Russia, China, and India's willingness to do business with Israel despite politics.

Mr Netanyahu has pushed for closer trade ties with India and China in recent years.

Earlier this month, Indian Prime Minister Narendra Modi paid a state visit to Israel, during which the two countries signed a number of trade agreements cementing increasingly warm relations.

AP