Staff Reporter
All Israeli settlements in the West Bank are illegal under international law. The UK sanctions come as Israel plans to develop 1,200 new homes in the occupied territory.
Britain is preparing to take a tougher line against Israel by imposing trade restrictions on goods produced in Israeli settlements in the occupied West Bank a move that threatens to further strain already tense relations between London and Jerusalem.
But what exactly is Britain trying to achieve and does this amount to a trade war with Israel?
The short answer is No the restrictions are aimed at settlements, not Israel as a whole
The UK Government’s new measures are focused specifically on goods produced in Israeli settlements in the West Bank, rather than a blanket ban on British trade with Israel.
Foreign Secretary Ed Miliband has argued that the policy is designed to oppose settlement expansion and protect the possibility of a future two state solution, in which Israel and a sovereign Palestinian state exist alongside one another. The move comes amid growing British concern about Israel’s expansion of settlements, particularly plans for development in the strategically sensitive E1 area of the West Bank.
Britain and other governments fear that further construction there could effectively split the West Bank in two, making the creation of a viable Palestinian state considerably more difficult.
Why does Britain regard the settlements as a problem?
The UK, like much of the international community, considers Israeli settlements in the occupied West Bank to be contrary to international law.
British ministers argue that allowing trade with settlements can help sustain an activity they believe undermines Palestinian territorial viability and the prospects for peace.
The Government has therefore framed the restrictions not as punishment of Israel itself, but as an attempt to put economic pressure on settlement activity.
Previous British measures have already targeted individual Israeli settlers and illegal outposts. The proposed trade restrictions would go further by covering goods from settlements more broadly.
Is this connected to the war in Gaza?
Yes but there is an important distinction.
Britain’s policy towards Israel has hardened considerably amid the continuing conflict and humanitarian crisis surrounding Gaza. However, the latest trade restrictions are primarily focused on settlements in the West Bank, rather than being a general trade embargo imposed because of Israel’s military campaign in Gaza.
Britain has separately restricted certain arms export licences where it assessed there was a clear risk that equipment could be used in serious breaches of international humanitarian law in Gaza.
That means it would be misleading to describe the latest announcement simply as Britain “sanctioning Israel over Gaza”.
How much British trade is actually at stake?
The economic impact could be relatively small.
UK Government figures show total trade in goods and services between Britain and Israel was around £6 billion in the year to the end of 2025. British exports were £3.5 billion, while imports from Israel were £2.5 billion. Only a fraction of that trade is expected to be affected by restrictions specifically targeting settlement goods.
That is why the measure is likely to have greater political and diplomatic significance than economic impact.
Israel and America are furious
The move has already triggered a sharp response from Israeli officials.
Israeli President Isaac Herzog warned that British sanctions against settlements would put Britain on the “wrong side of history”, while Israeli ministers have threatened retaliation.
The United States has also criticised the British approach, with US Ambassador to Israel Mike Huckabee warning of possible consequences.
For Britain, that creates a delicate diplomatic balancing act: London wants to maintain its wider relationship with Israel while simultaneously putting pressure on the Israeli government over settlement expansion and Palestinian rights.
So what is Britain hoping to achieve?
There are three main objectives.
First, pressure Israel over settlement expansion. Britain wants to make clear that it will not treat settlement activity as normal economic activity.
Second, protect the two state solution. The Government argues that continued settlement expansion risks making a geographically viable Palestinian state impossible.
Third, send a political message. Even if the economic consequences are limited, restricting settlement trade demonstrates that Britain is prepared to attach consequences to policies it believes undermine international law and the prospects of peace.
The UK Government insists that it remains committed to trade with Israel generally. The measure is therefore better understood as a targeted sanction against settlement activity, rather than a wholesale economic boycott of Israel.
Could this escalate?
That is the big question.
Britain’s move comes as several Western countries have been reassessing their relationships with Israel following the Gaza war and the expansion of settlements.
Critics in Britain argue that the policy is symbolic and risks damaging relations with a key Middle Eastern ally without changing Israeli policy. Supporters counter that failing to act would allow settlement expansion to continue unchecked.
Either way, the announcement marks a significant shift in Britain’s approach.
The message from London is becoming increasingly clear: Britain wants to maintain its relationship with Israel but it is no longer prepared to treat Israeli settlement expansion as business as usual.
Earlier, Israeli and US officials warned the UK over the plans – Israel’s President Isaac Herzog called them a “grave miscalculation”
Israel closes British consulate in response to British sanctions
The Israeli Foreign Minster has announced that Israel will close the British consulate in East Jerusalem, which plays a key role in Britain’s diplomatic affairs regarding the West Bank and the Palestinian territories. In addition, Israel has not only announced the closure of the consulate but has also taken further steps, including the announcement of the withdrawal of British representatives from the US-led coordination center for Gaza, the decision to end British training of Palestinian Authority security forces, and a ban on entry into Israel of some British politicians, MEPs and others, including former British leader Jeremy Corbyn. Israel described this move as interference in its internal affairs and political pressure, which is why it has taken retaliatory measures against the consulate and other British activities.
12 other countries also announce bans on Israeli settlement products & stressing a two-state solution
In addition to the UK, Canada, the UK, France, Spain, Ireland, Norway, Sweden, Denmark and others issued a joint statement, demanding that Israel stop settlement construction, expressing concern over the issuance of tenders for the E1 settlement project, and announcing support for restrictions on trade in settlement products. According to foreign media, Canada, the UK, France, Spain, Ireland, Norway, Sweden, Denmark, Finland, Iceland, Poland and Portugal have said in a joint statement that the Israeli government’s actions in the West Bank are harming the prospects for a two-state solution.
