Iran can easily destroy Israel, it doesn't even take much to do it. But destruction of Israel would mean western countries will rush to Israel to prevent Iran from occupying that land. It is here the challenge lies, Iran does not have the power to fight a multifront war in Israel, against the entire world. Not to mention the backlash Iran would receive from the international community, and the fact that we would probably be attacked by US and NATO, prevents us from taking such action. On the other hand, responding to Israeli aggression by attacking it, not invading and occupying it, does not give the international community a casus belli. Irans lack of retaliation is an entirely political decision, based on that we don't have anything (politically speaking) to gain from attacking you.