Israeli President Shimon Peres said talks with Hamas to try to free kidnapped Israeli soldier Gilad Shalit are continuing and that “the gap has narrowed.”

"We’re in the middle of negotiations… but we didn’t reach an agreement. And in that case, we wouldn’t want to endanger his life,” Peres said Sunday in an exclusive interview with FOX News.

Asked if he thought a prisoner exchange would happen soon, President Peres said, “I think there is a chance it will happen soon, but Hamas is not an organized group of people and what they say today – they may change tomorrow.”

Watch Bret Baier's interview Monday on Special Report at 6 p.m. ET.

Shalit was captured by Hamas in 2006. On Thursday, the Shalit family celebrated Gilad’s 23rd birthday — his third year in captivity.

German magazine Der Spiegel reported Saturday that German mediators are involved in the talks, and that a new proposal includes Israel releasing more than 400 Palestinian prisoners in exchange for Shalit.

Asked about that decision, Peres told Fox News, “You’re right. It is a very difficult decision and it’s very painful. But, according to our set of values and to our way of life – the life of a single person is worth the whole world. We take care of every individual as though he would be the collective sum of many people.”

Peres also said Sunday that Israel will "reply immediately" if attacked by Hamas — one day after after Israel Air Force planes bombed a tunnel in the northern Gaza Strip in response to a Qassam rocket fired by Palestinian militants into an Israeli town early Saturday.

"They know immediately there will be retaliation," he said. "There is an unwritten game between us and them. They know if they won’t respect it, they will pay heavily.”