(Reuters) - Israeli Prime Minister Benjamin Netanyahu dropped heavy hints on Sunday of an early election, shifting the national focus from a former spymaster´s accusations that he could start a rash war with Iran.

The next general election in Israel is not due until October 2013, but a new conscription law that might force ultra-Orthodox Jews to serve in the army and an upcoming budget debate could crack open his coalition of religious and nationalist parties.

With opinion polls showing the right-wing leader on track to win another term if an election was held now, speculation has been ripe that Netanyahu will opt to bring the ballot forward.

Meeting with cabinet ministers from his Likud party on Sunday, Netanyahu signaled he was considering an early vote, after having insisted publicly that he would wait until 2013.

"The prime minister said that he´ll be speaking to coalition leaders in the next week or two about the date of an election," said a government official who attended the meeting.

"Nothing has been decided, but he wants to see what the political reality is."

Israeli media swiftly shifted gears, moving from the allegations against Netanyahu leveled by Yuval Diskin, ex-chief of the Shin Bet domestic security service, to talk of an election as early as August.

Diskin told a public forum on Friday that Israel´s leaders were unfit to tackle Tehran´s nuclear program, suggesting they could start a pre- emptive war out of "messianic feelings".

Government officials, while implying Diskin had political ambitions or was bitter over being snubbed for a promotion, said he had also potentially set back Israel´s lobbying for tougher international diplomacy to curb Iran.

CREDIBILITY

"The reason why the Europeans and other countries are coming aboard (on sanctions) is not their concern about the Iranian nuclear program, but their concern that Israel might do something about that program. Europe works to thwart military action, not to promote it," a senior Israeli official said.

"This means that if you are against Israel taking military action, the worst thing you can do is undermine the credibility of that option," the official said, declining to be named.

Netanyahu has said Iran´s uranium enrichment is aimed at developing nuclear weapons that would threaten Israel´s existence. Iran says the project is peaceful.

Domestic political tensions have been rising since Israel´s Supreme Court ruled in February that the so-called "Tal Law", a 2002 measure that effectively shielded ultra-Orthodox communities from military service, was unconstitutional.

The law, which has been renewed by parliament every five years, will expire in August.

The court accepted arguments the Tal Law violated the principle of equality in a country where Jewish men and women are subject to the draft at the age of 18. Men serve three years, women, two. Arab citizens of Israel are exempted.

The debate over drafting the ultra-Orthodox has been at the heart of Israeli politics for decades, and the Netanyahu government, faced with the court´s ruling, must now either revamp the "Tal Law" or approve new legislation.

"The Tal Law will be replaced with a different law -- a more equal and correct one -- and I am the one who will bring it for a vote before the Knesset," Netanyahu said in a statement on Sunday. He did not disclose whether he intended to impose military service on the ultra-Orthodox.

Netanyahu´s biggest coalition partner, Foreign Minister Avigdor Lieberman´s Yisrael Beitenu, advocates a new law that would require national service - including civilian alternatives to the draft - of the ultra-Orthodox and Israeli Arabs.

"We are not interested in bringing forward the election, this is not in the State of Israel´s national interest. However, I do not fear an election," Lieberman said on his Facebook page.

The ultra-Orthodox Shas party is leading the religious charge in the government against such a move and has also said it is up to the challenge of an early ballot.

(Additional reporting by Ari Rabinovitch and Dan Williams, Editing by Crispian Balmer) (© Thomson Reuters 2012. 04/29/12)