TEL AVIV—Israel’s Prime Minister Benjamin Netanyahu on Sunday ordered his foreign ministry to suspend contact with European Union bodies engaged in Israeli-Palestinian peace efforts, responding to the bloc’s decision to label products made in Israeli-occupied territories.

Mr. Netanyahu, who also acts as foreign minister, told the ministry to reassess the involvement of EU bodies “in everything that is connected to the diplomatic process.”

“Until completion of the reassessment, the Prime Minister has ordered a suspension of diplomatic contacts with the EU and its representative in this matter,” the foreign ministry said.

The move to suspend diplomatic relations on issues related to the peace process wouldn’t affect Israel’s relations with individual EU countries, the ministry added.

On Monday, EU foreign policy chief Federica Mogherini met Mr. Netanyahu on the sidelines of the climate conference in Paris in an effort to seek clarification on Israel’s actions, a European Commission spokeswoman said.