The European Union is threatening Israel with sanctions, including depriving Israelis living in illegal settlements of EU citizenship, as the peace process continues to stall.
The EU's head of foreign policy Federica Mogherini, is visiting the region this week, where she will meet Israeli prime minister Benjamin Netanyahu and Mahmoud Abbas, president of the Palestinian Authority.
A report in the Israeli press said the EU was considering a range of sanctions against Israel if it does not play an active role restarting peace talks with Palestine, which have been static since last April.
These include stripping dual Israeli citizens who live in illegal settlements of EU citizenship and forcing Israelis who live outside the country's internationally-recognised borders to obtain a visa for European travel. Currently, Israeli passport holders are free to travel throughout the EU without a visa.
Another proposed measure is to block trade between European businesses and those based in West Bank settlements.
Mogherini's visit comes after Netanyahu appointed deputy prime minister Silvan Shalom, who has previously rejected the two-state solution and backed Israeli settlement building, as Israel's new representative in the peace process.
The appointment was rejected by Palestinian Authority officials, who said negotiations were pointless as Netanyahu is not committed to peace.
Last week, Netanyahu's new right-wing coalition was sworn in. The coalition includes the Jewish Home party, whose leader supports settlement building in the West Bank and has previously said that Palestinians should forget about statehood.
Asaf Day, a political analyst at Israel-based consultancy Max Security, says the lack of any pro-Palestinian elements in the new government means the peace talks will get nowhere and EU sanctions could become a reality within months.
"Shalom is not known for his support for the peace process and the new deputy foreign minister, Tzipi Hotovely, is also very opposed to the two-state solution," says Day.
Brussels has come under increasing pressure to toughen its stance on Israel, particularly on the issue of settlement-building. Mogherini was recently sent a letter signed by 16 EU foreign ministers calling for clearer labelling of products sold in Europe but produced in the settlements.
More than 350,000 Israelis live in West Bank settlements, with a further 200,000 in east Jerusalem. Under the Fourth Geneva Convention, the international community considers it illegal for Israel to build settlements outside the Green Line, which was set out in 1949 to as a demarcation line between Israeli and Arab forces following the 1948 Arab-Israeli war.
In a Knesset speech today marking Jerusalem Day, an Israeli national holiday, Netanyahu said he had ordered the construction of Israeli homes throughout Jerusalem, including in neighbourhoods over the Green Line.
The prime minister's comments were met with criticism in Palestine. Abbas' spokesman, Nabil Abu Rudaineh, said there would be no peace in the Middle East without east Jerusalem as the capital of a Palestinian state.
Despite being a historical ally to Israel, the US administration under Barack Obama has been critical of Netanyahu's policy towards Palestine. Following the formation of Netanyahu's new coalition, Obama said a peace agreement was unlikely in the coming year, despite commitment to the process from Washington.
Maya Gril, Israel intelligence analyst at the Levantine Group, says that the impetus to restart negotiations is coming from Europe, rather than Israel's traditional ally.
"The US are not pushing as hard as the EU, they're playing behind the scenes. The Europeans are surprisingly the ones who are pushing forward on it," says Gril.
France and the UK pushed the UN Security Council to set a new timeline for peace negotiations at a recent meeting.
The EU is Israel's biggest trading partner, with total trade in 2013 amounting to around €29bn.
Correction: This piece was updated on May 20 to clarify the definition of the Green Line as a demarcation line set out between Israeli and Arab forces following the 1948 Arab-Israeli War. The Green Line was not set out to demarcate a Palestinian state, as previously reported.Try Newsweek: Subscription offers