Turkey's prime minister rounded passionately on Israel today, demanding that the Netanyahu government be punished for the attack on the Gaza flotilla, and accusing it of massacre, lies, and destroying all prospects of peace in the Middle East.

"Israel cannot clean the blood off its hands through any excuse," said Recep Tayyip Erdogan. "It is no longer possible to cover up or ignore Israel's lawlessness. This bloody massacre by Israel on ships that were taking humanitarian aid to Gaza deserves every kind of curse."

The trenchant warnings, in remarks to the Turkish parliament and cabinet in Ankara after Erdogan rushed home from a truncated Latin America tour, suggested the "special" relationship between Israel and the rising Muslim power straddling the Middle East and Europe is dead.

Turkish analysts viewed the flotilla attack as a tipping point in the balance of power in the Middle East, with Israel finally forfeiting its "strategic" links with an emerging regional power.

Relations between Turkey and Israel, close for decades, have been under strain since early last year when the Israeli onslaught on Gaza left 1,400 people dead. Erdogan felt personally betrayed by the Israeli invasion.

The flotilla attack looks like the final straw, ending a period of almost 20 years when Turkey played a crucial role as Israel's Muslim ally, discreetly seeking to mediate between Israel and its Arab foes, and acting as an American proxy in places where Washington hesitated to go.

"Today is a turning point," said the prime minister to repeated applause in Ankara. "They once again showed their ability to perpetrate slaughters … We warn Israel not to test Turkey's patience." Israel had to "absolutely be punished by all means," he said.

Erdogan tapped the strong emotions erupting in Turkey where support for the Palestinians is total, but where the elite has also traditionally maintained good relations with Israel.

The Israeli attack was on a Turkish boat. Most of the dead were Turks. The flotilla was organised by a large Islamist charity based in a region of Istanbul which is militantly Muslim. The charity is said to be close to Erdogan's governing AK party.

"Any establishment in Turkey, including the army, will not be able to explain any kind of co-operation with Israel to the public. This interception killed the possibility of working together on any subject," Ihsan Dagi, an analyst at the Middle East Technical University, told the Zaman daily newspaper.

Beneath the wave of popular revulsion and anger at the Israeli attack, the government is pursuing a highly dynamic foreign policy enhancing its growing clout across the region. "Blood has been spilt. This is eye-popping," said Hugh Pope, Turkey and Middle East analyst at the International Crisis Group in Istanbul. "We're moving into a new era."

The chill in relations with Israel started in January last year with the assault on Gaza. A few days before the invasion, Ehud Olmert, then Israeli prime minister, was sitting in Ankara at Erdogan's residence. The Turkish leader felt stabbed in the back. In Davos in Switzerland, Erdogan stormed out of a debate with Israel's president. Shimon Peres, saying: "They know well how to kill."

Last year Ankara cancelled major military exercises with Israel.

Things deteriorated further this year when Israel's deputy foreign minister, Danny Ayalon, humiliated the Turkish ambassador by deliberately placing him in a low seat and upbraiding him about a soap opera on Turkish TV in front of cameras. Ayalon told the cameramen it was important that people saw the ambassador lower "while we're up high".

Some prominent Turks saw the flotilla attack as deliberately targeted at Ankara.

"A message was to be delivered to Turkey when armed force was applied although there was no need for it. The message here was to make sure that Turkey is taught a lesson," wrote Mehmet Ali Birand, a prominent commentator. "This incident will ignite our tense relationship. There is no way of fixing it. From now on we won't be able to speak of a Turkish-Israeli alliance. Yes Turkey will be hurt, but Israel even more. The bill for losing an ally like Turkey will be very heavy."

Ankara recently set down a marker as a key regional player by surprising the Americans with the announcement of a nuclear fuel processing deal with Iran and Brazil, extending its influence on one of the Middle East's biggest crises – the Iranian nuclear issue.

"Erdogan is making a big play to become the leader of the Islamic street. The Egyptians are not happy. We need to watch this dynamic very closely," said a senior European diplomat.