Israeli Prime Minister Benjamin Netanyahu held an emergency meeting of his high-level security cabinet Thursday morning as top officials mulled how to respond to a unity bid between the militant Palestinian Hamas group and the more moderate Fatah movement.

Israeli officials have slammed the pact as proof that Palestinian Authority President Mahmoud Abbas is uninterested in reaching a peace accord with Israel, while Palestinians have defended the deal as bringing a two-state solution closer.

Israeli radio said ministers were likely to announce fresh retaliatory measures on top of a raft of financial sanctions unveiled this month when the Palestinians applied to join 15 international treaties.

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They were not expected to order a complete halt to US-brokered peace talks with the Palestinians, however.

Netanyahu’s office described the deal between Abbas and Hamas, which opposes all peace talks with Israel, as “very grave.”

But it said it was for ministers to decide whether to announce any new measures after Thursday’s meeting.

“By tying itself to Hamas, the Palestinian leadership is turning its back on peace,” a Netanyahu aide said.

On Wednesday, Hamas and the Palestine Liberation Organization, which is dominated by Abbas’s Fatah movement, agreed to form a unity government and call for new elections across the West Bank and Gaza. The move would bring the terror group Hamas into the Palestinian Authority fold and make it party to negotiations with Israel.

Netanyahu lambasted the decision and phoned US Secretary of State John Kerry Wednesday night to denounce the move, which he said showed the “Palestinians were running away” from making decisions, according to a senior Israeli official, referring to efforts to extend peace talks with Israel past their April 29 deadline.

“Abbas has chosen Hamas and not peace. Whoever chooses Hamas does not want peace,” Netanyahu said in a statement.

Israel also canceled a round of peace talks scheduled for Wednesday night.

However, Palestinian negotiator Saeb Erekat told AFP there was no meeting scheduled and Ramallah would hold a bilateral meeting with US meditor Martin Indyk on Thursday.

Hamas is labeled by the US and Israel as a terror organization and has refused to recognize Israel or renounce violence. The group has been bitterly opposed to peace efforts.

The US State Department expressed “disappointment” with the Palestinian move Wednesday.

The security cabinet comprises nine top ministers, including Foreign Minister Avigdor Liberman, Finance Minister Yair Lapid, Economy Minister Naftali Bennett and and the chief peace negotiator, Justice Minister Tzipi Livni, all of whom have castigated the unity deal.

“The reconciliation agreement that Mahmoud Abbas signed with Hamas is a bad step, which not only caused the cancellation of the meeting, but cast a heavy shadow on the possibility to progress,” Livni said Wednesday night.

Bennett, from the Hawkish Jewish Home faction, took the harshest line, saying the reconciliation made the PA into the “world’s largest terror organization.”

Lapid, head of the centrist Yesh Atid party, said that Abbas’s earlier threats to dissolve the PA and hand responsibility for the West Bank back to Israel was “illogical,” but maintained that the Fatah-Hamas unity deal was even worse.

“Hamas is not a government,” he said. “It is a jihadist terror organization that has inscribed on its flag the killing of civilians — women, children, old people — just because they are Jewish.”

As reports of the deal leaked out early Wednesday, Liberman said the pact would sink peace talks. “The signing of an agreement for a unity government between Fatah and Hamas is a signature on the end of negotiations between Israel and the Palestinian Authority.”

Responding to Israeli anger, Abbas denied that reconciliation with Hamas precluded peace efforts.

“There is no incompatibility between reconciliation and the talks, especially since we are committed to a just peace on the basis of a two-state solution in accordance with the resolutions of international law,” Abbas said in a statement issued by his office.

“This move, supported by the Arab world and internationally, will strengthen the ability of the Palestinian negotiators to realize the two-state solution,” the statement read.

Jibril Rajoub, deputy director of the Fatah Central Committee, told The Times of Israel that the decision of the two Palestinian groups to form a unity government was an internal national matter, adding that “no party that believes in the solution of two states for two peoples has the right to deny it.”

Hamas and Fatah have been bitter rivals since 2007, when Hamas violently took over the Gaza Strip, leaving Fatah to rule the West Bank. Previous efforts at reconciliation have failed.