Israeli Prime Minister Benjamin Netanyahu | EPA/ABIR SULTAN / POOL Israel slams ‘shameful’ EU Two allies locked in standoff over new rule to label goods from settlements.

A new European Union rule to slap labels on products from Israeli settlements escalated quickly Wednesday into a heated feud between the two allies and the suspension of some diplomatic dialogue.

The rule means Israeli firms selling their goods in Europe will need to differentiate between products made in Israel and those produced in Israeli settlements. European Commission vice president Valdis Dombrovskis said the move was merely "a technical issue, not a political stance."

But Israel was furious at the decision, with Prime Minister Benjamin Netanyahu likening it to the Nazis' treatment of Jewish businesses.

"The labeling of products of the Jewish state by the European Union brings back dark memories, Europe should be ashamed of itself," he said during a visit to Washington on Wednesday.

“The EU has decided to label Israel, and we are not prepared to accept the fact that Europe is labeling the side that is being attacked by terrorism,” he said.

The Nazis imposed an economic boycott on Jewish businesses, telling people not to buy from them.

Shortly after Netanyahu's comments, Israel's foreign ministry announced that its diplomats would not attend a number of scheduled EU meetings.

"Because of the latest EU decision, Israel is suspending its diplomatic dialogue with the EU in various forums which had been scheduled to take place in the coming weeks," the foreign ministry said, according to Agence France-Presse, after summoning the EU's ambassador, Lars Faaborg-Andersen, to the foreign ministry.

An Israeli official told POLITICO that the foreign ministry was halting "certain working groups and sub-committees."

The Commission wants the wording "Israeli settlement" to be added to labels. For example, an item from the West Bank could read "product from West Bank (Israeli settlement)."

Netanyahu's comments were not the first time that a senior Israeli politician has used such strong language to describe the labeling rules, which apply to fresh fruit and vegetables, wine, honey, olive oil, eggs, poultry, organic products and cosmetics.

After more than a dozen European foreign ministers sent a letter to Federica Mogherini, the EU's foreign policy chief, urging her to push forward new rules on labeling products, Avigdor Lieberman, Israel’s foreign minister, suggested that such a distinction could be made by putting a yellow star on the products, a reference to the stars that Jews were obliged to wear by the Nazis.

Some European countries — including the U.K., Belgium and Denmark — already have such guidelines in place, but Dombrovskis said the new rules apply to all 28 member countries. All Israeli settlements are illegal under international law.

The Commission’s decision angered Israeli officials in Brussels, who described the move as politically motivated.

“We regret that the EU has chosen, for political reasons, to take such an exceptional and discriminatory step, inspired by the boycott movement, particularly at this time, when Israel is confronting a wave of terrorism targeting any and all of its citizens,” Israel's permanent representation to the EU said in an official statement.

A group of U.S. senators waded into the EU-Israel controversy earlier this week.

GOP presidential hopeful Sen. Ted Cruz (R-Texas) and Sen. Kirsten Gillibrand (D-N.Y.) spearheaded a Monday letter to Mogherini decrying the EU’s labeling change and saying it would dissuade Europeans from purchasing Israeli products and amount to a “de-facto boycott of Israel.”

“At a time of significant instability in the region, it is deeply concerning to us that the EU is considering a proposal intended to impose more diplomatic and economic pressure on Israel,” the letter reads. “The proposed labeling guidelines play into the narrative of the Boycott, Divestment, and Sanction (BDS) movement, which is an effort to delegitimize Israel rather than promote a resolution of outstanding issues between Israel and the Palestinians.”

The bipartisan letter was signed by 36 senators, including one of Cruz’s rivals for the GOP nomination — Sen. Marco Rubio of Florida — and many senior Democrats.

The letter notes that in the 1970s, Congress made it illegal for American companies to comply with the Arab League’s boycott of Israel. Similarly, Congress passed a bill this year saying that the United States, when negotiating a new trade deal with the EU, is required to “discourage” Europe from creating policies “that would boycott, divest from or sanction Israel.”

Benjamin Oreskes contribute to this article