Ministers say contracts for military equipment will be individually examined to ensure they are not being used in Gaza offensive

The British government is reviewing £8bn of controlled export licences granted to Israel – commercial and military – to see whether each licence is appropriate in light of the conflict in Gaza, Downing Street has said.

Ministers said they would not stop licensing military equipment to Israel outright because they believed the country had a "legitimate right to self-defence".

The contracts – mostly for cryptographic software and military communications, but also weapon parts – will be individually examined to ensure they are not being used for internal repression or the provocation of conflict.

Downing Street confirmed it was conducting the review after David Cameron gave his strongest comments yet on the crisis, saying the UN was right to condemn the shelling of schools as a "moral outrage".

The prime minister, however, stopped short of Ed Miliband's outright opposition to Israel's incursion into Gaza, and made it clear that the British government blamed Hamas for provoking the conflict.

"We are currently reviewing all export licences to Israel to confirm that we think they are appropriate," the prime minister's deputy official spokesman said.

Campaigners are most worried about £42m of arms export licences granted to 130 British companies, including two supplying components for the Hermes drone and one selling components for Israel's main battle tank.

The information was uncovered by Campaign Against the Arms Trade, but the government said it had no plans to investigate whether British-made parts were being used in weapons or military equipment deployed in Gaza.

In late July, Tobias Ellwood, a new Foreign Office minister, said: "The United Kingdom does not believe that imposing a blanket arms embargo on Israel would promote progress in the Middle East peace process. All countries, including Israel, have a legitimate right to self-defence, and the right to defend its citizens from attack. In doing so, it is vital that all actions are proportionate, in line with international humanitarian law, and are calibrated to avoid civilian casualties."

The Green party has called for an outright arms embargo on Israel, saying the sale of military parts was "nothing short of scandalous". Caroline Lucas, the Green MP for Brighton, said: "There must be an immediate embargo on all arms sales and military co-operation with Israel."

Following Operation Cast Lead, Israel's 2008 offensive in Gaza, the UK has admitted that equipment used by the Israeli military during the operation had almost certainly contained British-made components.

A spokesman for the Department for Business, Innovation and Skills said: "We are currently reviewing all existing export licences to Israel. All applications for export licences are assessed on a case by case basis against strict criteria. We will not issue a licence if there is a clear risk that the equipment might be used for internal repression, or if there is a clear risk that it would provoke or prolong conflict."

Andrew George, a Liberal Democrat MP, called for a Royal Navy hospital ship moored in Falmouth to be sent to Gaza to ease the pressure on the territory's medical facilities.

"Israel continues to bombard Gaza and restrict the flow of essential medical supplies and humanitarian relief," he said. "A humanitarian crisis in Gaza must be intolerable, with people unable to get out and effective relief barely able to get in.

"The UK should not just sit back and do nothing. Britain should be at the forefront of the humanitarian response to the tragic events in Gaza. By deploying RFA Argus, we would offer a symbol of action and support from the UK via Cornwall towards the citizens of Gaza severely affected by Israel's military response."

• This article was amended on 8 August 2014. An earlier version in both the headline and the text said that the British government is reviewing the sale of £8bn in arms and military goods to Israel. To clarify: of the £8bn of controlled export licences under review £7.75bn is for commercial equipment, mostly cryptographic software to supply Israel's mobile phone networks.