Norway has blocked its $820 billion pension fund from investing in two Israeli companies because of their construction activities in east Jerusalem.

The Foreign Ministry this week blacklisted Africa Israel Investments and its subsidiary, Danya Cebus, on a recommendation from the fund's ethics council.

The companies were excluded from the fund ' one of the world's biggest institutional investors ' once before, in 2010. That time it was for construction in the West Bank.

More than 500,000 Israeli settlers live in the West Bank and east Jerusalem, territories that Israel captured in the 1967 war and which the Palestinians now hope will be part of their future state.

The fund's ethics council says the settlements represent "serious violations of the rights of individuals in situations of war or conflict."