As world leaders call on beleaguered Egyptian President Hosni Mubarak to negotiate with opposition groups and prepare the country for free and fair elections, Israeli Prime Minister Benjamin Netanyahu expressed fear Monday that Islamic extremists will step into the breach and threaten the peaceful relationship between the two countries.

The Israeli government has remained largely silent as anti-government protests rage on the streets of Egypt. But during a joint press conference with visiting German Chancellor Angela Merkel, Netanyahu grimly warned Monday that the chaos has led to a power vacuum that could easily be exploited by an "organized Islamic group."

"It has happened. It happened in Iran," Netanyahu said. "A takeover of oppressive regimes of extreme Islam violates human rights, grinds them to dust ... and in parallel also pose a terrible danger to peace and stability."

Before Monday, Netanyahu had limited his comments on the situation, saying only that he is "anxiously following" the unrest on the streets of Cairo and other cities and that Israel remains committed to peace with Egypt.

In 1979, Egypt became the first Arab nation to sign a peace accord with Israel, and the two countries have maintained close ties. Israeli officials credit Mubarak with honouring the terms of the accord, which include the demilitarization of the Sinai Peninsula.

In a move that indicates how concerned Israel is with the unrest next door, Netanyahu agreed Monday to let Egypt send 800 soldiers to the Sinai Peninsula to ensure the chaos does not spread to that region.

Netanyahu is also concerned about how a regime change in Egypt will affect life inside Israel, from defence spending to providing electricity to its citizens. The government may have to increase its military presence along its border with Egypt, and seek other sources of natural gas if the flow from Egypt is cut off. Israel converts that natural gas to electricity.

"Israel would then have to burn coal," Middle East analyst Jim Lederman told CTV News. "Coal is more expensive. The price of electricity would go up."

In another sign that Israel is concerned about developments in Egypt, the leading newspaper, Ha'aretz reported Monday that officials are pressuring countries, including Canada, to curb criticism of Mubarak.

Since the protests began, most world leaders have restricted their public comments to urging the embattled Egyptian president to reach out to the opposition and allow for free elections.

Meanwhile, Netanyahu also said Monday that despite the unrest in Egypt, peace talks between the Israelis and Palestinians should go on, even without Egyptian mediators.

Mubarak has served as a mediator between Israeli and Palestinian officials, as well as point of contact with the broader Arab world.

With a report from CTV's Omar Sachedina and files from The Associated Press