Vettel, returning to the cockpit for the first time since his crash on Wednesday, set a new testing lap record on Friday by eclipsing Ferrari team-mate Charles Leclerc's time of one minute and 16.231 seconds by one-hundredth of a second.
But Mercedes finally posted what looks to be a more representative time, with Valtteri Bottas setting a time of one minute 16.561 to trail Ferrari by around three-tenths of a second.
"I think the gap (to Ferrari) is potentially half a second," reigning world champion Hamilton told reporters.
"Ferrari are the fastest. This is going to be the toughest battle yet. Ferrari's pace is very, very good at the moment. The challenge is going to be harder than ever."
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But Hamilton added: "Testing is testing. There's no reward for being quick in testing.
"We don't know because everyone has different engine modes and fuel loads. It will be four races before we really know where we stand."
The opening round of the 2019 world championship is scheduled to start in Melbourne on March 17.
Mercedes plan to make more significant changes to their W10 car, but Hamilton added that he has "no reason to expect" the gap to Ferrari to decrease.
"We could get there and it could be bigger, we could get there and it could be less," Hamilton added.
"There's no way looking at the GPS to say what fuel load we're on and what engine mode they're on. They're faster on the straights than us, for example.
"Of course we hope it's not bigger than we might see now and we hope that it's better.
"But we can't bank on that so we've just got to work towards closing that gap that we think might be there."
Bottas put some of the fastest C5 rubber on his car to easily trump the previous fastest time recorded by other teams.
Daniil Kvyat continued to underline the performance potential in the Honda power unit by going third for Toro Rosso with one minute 16.898 seconds.
The Russian was ahead of his former team-mate Carlos Sainz in the McLaren and the Haas of Romain Grosjean.
The first session of the day ended under red flags, meanwhile, with Kimi Raikkonen stopping out on track in his Alfa Romeo C38.
