It is often claimed that Iran is not an existential threat to Israel because Iran's leaders would not lightly attack Israel and risk the own destruction. This claim misses part of the point because there Iran does not have to actually build a weapon and destroy Jerusalem or Tel Aviv to threaten Israel's existence, especially in the minds of Israel's strategic planners. Israel's planners have, with the at assistance of the West, built and maintained a regional nuclear monopoly precisely because they believe having such a monopoly is necessary for Israel's continued existence.
Israel sees Iran having a nuclear weapons capability because Israeli strategists believe Israel's long-term survival depends on its neighbors believing Israel cannot be countered militarily. Ariel Roth of the Council on Foreign Relations puts it this way:
Israel fears that Iran’s nuclear ambitions could undermine its qualitative superiority of arms and its consistent ability to inflict disproportionate casualties on adversaries -- the cornerstones of Israel’s defense strategy. Although some idealists dream of reconciliation in the Middle East based on a genuine and mutual recognition of all parties’ legitimate rights, most Israelis believe the key to enduring peace in the Middle East is convincing Israel’s adversaries that ejecting Israel through force is an impossible task not worth pursuing.If Iran has a nuclear capability, it can adopt the policy that if Israel was to use nuclear weapons on Cairo, Mecca, Riyadh, Beirut Baghdad or Damascus it would rush to build a weapon it could use to retaliate.
Even though this scenario is very unlikely to actually play out, how scenarios play out in theory impact how parties calculate and act in the real world. For example, if hostility between a theoretically independent Saudi Arabia and Israel would escalate to the destruction of Saudi resources with Saudi Arabia unable to retaliate, then the Saudis could be restrained much further down the escalation ladder.
Israeli strategists who believe a credible if extreme last resort threat to use nuclear weapons on its adversaries is necessary for Israel's survival necessarily believe that anything that removes that Israeli option is a threat to Israel's survival.
When Netanyahu describes Iran as an existential threat, I assume this is what he means. The Israelis who devoted tremendous resources to establishing a nuclear threat for Israel did so because they believed this threat, and also Israel's regional monopoly on the ability to make this threat, is existentially necessary for Israel.