Stead has risen from the virtual obscurity of Huddersfield to Premiership saviour with Blackburn, and Souness feels there is more to come.
The striker has scored some vital goals for Rovers already and he weighed in again with the winner at Everton which effectively secured Blackburn's place in The Premiership.
Souness claims Stead can become one of the most feared strikers in the game, once he adds some strength to complement his other attributes.
"The only criticism of Jon when he arrived was that, for such a tall lad, he wasn't strong enough," said Souness. "But he's putting that right by working in the gym every day.
"The physios have worked out a programme of weights for him and we're already seeing the benefits.
"Defenders are going to look at him in a couple of years and think: 'I'm not sure I fancy competing with him in the air.'
"When you add that to his ability on the floor - great pace and touch - you know he is going to be more of a handful than ever.
"We've seen players leap from obscurity to England recognition before and I can see the same happening with Jon."
Souness has warned Stead that he will need to continue to work at his game next term.
"Next season will be a test for Jon," said Souness. "Defenders will know him.
"But he will be stronger and fitter after a good pre-season and I expect him to break into the England side."
