Israeli Prime Minister Benjamin Netanyahu has ordered ministers to limit contact with their Palestinian counterparts after the Arab League blamed his government for the "dangerous stalemate" in US-brokered peace talks.
The moves came a day after US Secretary of State John Kerry, who kick-started the talks in July, blamed Israel for derailing the process by announcing new settlement construction in what he described as a "poof" moment in negotiations.
"In response to the Palestinian violation of their commitments under peace talks... Israel government ministers have been told to refrain from meeting their Palestinian counterparts," an Israeli government official told AFP, requesting anonymity.
Palestinian labour minister Ahmad Majdalani played down the significance of the move.
"In any case there are no (regular) meetings organised between Palestinian and Israeli ministers, apart from the finance ministers," he told AFP.
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A Palestinian government source told AFP that the Israelis might move to block tax revenue collected by Israel on the Palestinian Authority's behalf, given that meetings between the finance ministers dealt principally with this issue.
Israel briefly withheld the tax revenues in December 2012 to punish the Palestinians' successful drive for observer state status at the United Nations.
Arab foreign ministers gathered in Cairo on Wednesday with Palestinian leader Mahmud Abbas saying Israel was "wholly responsible for the dangerous stalemate" in the US-brokered talks which are scheduled to wrap up on April 29.
Kerry on Tuesday said Israel's approval of Jewish settlements in east Jerusalem on April 1 ignited the latest crisis in the negotiations, a charge that left Israeli officials bristling.
While he blamed intransigence on both sides, Kerry told US lawmakers that a delayed Israeli plan to release several Palestinian prisoners as part of a good faith effort was sabotaged by the settlements move.
"In the afternoon, when they were about to maybe get there, 700 settlement units were announced in Jerusalem and, poof, that was sort of the moment," he testified to the Senate Foreign Relations Committee.
At the end of March, Israel refused to release a final batch of long-serving Palestinian prisoners as agreed under the talks, and at the same time reissued tenders for 708 settler homes in annexed Arab east Jerusalem.
