The former prime minister said the "predominant emotion" in the West was to stay out of Syria, where rebels are battling to oust Bashar Assad and his regime, and avoid becoming embroiled in the politics of the region.
But in a speech on political leadership he warned that the cost of staying out "may be paid in a higher price later".
Blair said the situation in Syria was one of many "ugly choices" facing leaders, including on Iran's nuclear ambitions and economic policy.
Speaking in Jerusalem, Blair said: "The best short-term politics will often pull in the opposite direction from the best long-term policy.
"So much of the sentiment in the Western political economy is anti-business and particularly anti-the banks.
"But the best long-term policy is almost certainly to encourage business and have the financial sector back on its feet and thriving
"Undoubtedly the predominant emotion in the West today is to stay out of Syria; indeed to stay out of the region's politics. But as every day that passes shows, the cost of staying out may be paid in a higher price later."
Blair said the threat of a nuclear-armed Iran must be "overcome".
"We have to be prepared and be strong in defence of our values," he said.
"It is why Iran's nuclear weapons ambitions and export of terrorism round the region are a threat. We must be determined to confront and overcome that threat.
"Those that truly hold the power in Tehran must know of our determination and feel its vigour.
"Of course, any choice involving military action is fraught. No one wants it. But a nuclear armed Iran is the worst choice and we shouldn't make it."
Mr Blair, a Middle East peace envoy for the Quartet of international powers, said the "window of opportunity" for progress on the relationship between Israelis and Palestinians would "be open only for a short space of time".
He said: "Let us hope that over the coming weeks, a plan for progress can be put in place in which politics, economics and security are aligned.
"With (US Secretary of State) John Kerry's fantastic energy and commitment, we're all working hard to accomplish this.
"But we should understand: the window of opportunity will be open for only a short period of time. We must go through it together. If not the window will close and could close forever. Time is not our friend. This is urgent. This is now. This is the time for statesmen not politicians."