The US hit back at Binyamin Netanyahu on Sunday after the Israeli prime minister warned that calls for boycotts of Israel to pressure it over settlements in the occupied Palestinian territories are "immoral and unjustified" and would not achieve their goal.

In a public spat that reflected tensions over slow-moving Israeli-Palestinian peace talks, the state department rebuked Netanyahu for apparently misrepresenting the words of the US secretary of state, John Kerry. Another senior rightwing minister accused Kerry of serving as a "mouthpiece" for antisemitic views.

Speaking on the record at the start of the weekly cabinet meeting, the Israeli prime minister said that the growing international boycott movement would only "push peace further away" by encouraging Palestinian intransigence.

"No pressure will force me to give up the vital interests of the state of Israel, above all the security of the citizens of Israel," Netanyahu stated.

The remarks followed Kerry's warning on Saturday that failure to reach a peace agreement with the Palestinians would damage Israel's capacity to be a democratic state and could lead to more boycotts.

"The risks are very high for Israel," he said at an international security conference in Munich. "People are talking about boycott. That will intensify in the case of failure. We all have a strong interest in this conflict resolution. Today's status quo absolutely, to a certainty, I promise you 100%, cannot be maintained. It's not sustainable. It's illusionary. There's a momentary prosperity, there's a momentary peace."

The US statement department spokesperson, Jen Psaki, noted that Kerry had been referring to the actions of others and resolutely opposed boycotts. "Secretary Kerry has always expected opposition and difficult moments in the process, but he also expects all parties to accurately portray his record and statements," she added pointedly.

Two weeks ago Israel's defence minister, Moshe Yaalon, raised the political temperature by describing Kerry as "obsessive and messianic" in his pursuit of an agreement.

Tzipi Livni, Israel's chief negotiator, said Kerry was merely "expressing concern" for Israel's future.

Netanyahu's coalition government has registered alarm at growing talk of boycotts. In the past week, a Danish bank announced it would sever ties with Bank Hapoalim, Israel's largest bank, over the financing of settlements built across the old 1967 border in breach of international law. Danske Bank cited "ethical and legal conflicts." The Israeli bank said Danske Bank had no investments with it.

Pressure has been building up in the European Union for tougher measures to punish Israel for its settlement activity.

Netanyahu's remarks were mild compared to those of cabinet colleagues. Yuval Steinitz, the intelligence minister and a member of the prime minister's Likud party, called Kerry's comments "offensive, unfair and insufferable", complaining that Israel could not negotiate "with a gun pointed to its head".

Further to the right the economics minister, Naftali Bennett, from the religious and pro-settler Jewish Home party, said bluntly: "We expect our friends around the world to stand beside us, against antisemitic boycott efforts targeting Israel, and not for them to be their amplifier."

With the US pushing hard, Israel and the Palestinians relaunched peace talks in July after a long gap but these have so far shown little sign of progress. With an April deadline looming, Kerry is expected to present ideas for a "framework" agreement sometime in the next few weeks.

The boycott issue has been dramatically highlighted in recent days by the resignation of film star Scarlett Johansson as an Oxfam goodwill ambassador because of her appearance in an advert for SodaStream, an Israeli company that has a factory built on expropriated Arab land in the West Bank settlement of Ma'ale Adumim. The actress said she had "a fundamental difference of opinion" with the humanitarian group because it opposes all trade with Israeli settlements. Oxfam came under pressure from the boycott, divestment and sanctions (BDS) movement.

Up to 100 Palestinian activists have established a new protest against settlements by occupying an abandoned village in the Jordan valley. Called Melh al-Ard – "salt of the earth" in Arabic – the campaign rejects the status quo "especially given futile negotiations destroying the rights of our people for liberation and claim to their land". It has called on international supporters "to stand with the demands of the Palestinian people and boycott all Israeli companies including Israeli factories and companies that work in the Jordan Valley and profit from Palestinian natural resources".

• This article was amended on 3 February 2014. The original said that SodaStream's headquarters were based in Ma'ale Adumim. This has been corrected.