The Israeli government has revealed how it could respond if UK goes ahead with imposing sanctions on illegal settlements being constructed on the Palestinian West Bank13:42, 02 Sep 2026Israel has warned it will retaliate if the government imposes fresh sanctions on its illegal developments in Palestine as part of the Government's relations "reset".Foreign Secretary Ed Milliband told the House of Commons on Tuesday that Burnham's Government would be pursuing a "comprehensive reset" with the state "in the coming weeks". He said the decision was based on the Netanyahu government's continued pursuit of settlement expansion in the Palestinian West Bank, a practice deemed illegal by the United Nations and international community at large.Milliband's Israeli counterpart has reacted furiously to the proposal to examine how British companies have helped contributed to "financing, constructing or advertising new settlements".Speaking to Hebrew-language news site Ynet, Gideon Sa'ar pledged to "act against Britain" if the UK decided to go ahead with its plans, while warning it would be a "big mistake". He vowed: "If Britain acts against Israel, Israel will act against Britain. If they act, I think they will be making a big mistake."Israel sparked international outrage last month after it opened up tenders for the construction of more than 1,200 settlement homes in the so-called East 1 - or E1 - settlement area of the West Bank.The area, seen as a tactically significant zone to the east of Jerusalem, has been illegally occupied by Israeli settlers since the 1990s, and the new 1,234 tenders make up fewer than half of 3,400 construction projects approved by far-right Israeli finance minister Bezalel Smotrich in 2025.Smotrich proudly asserted when approving the plans last year that they amounted to "burying the Two-state solution", something Milliband said was a red line for Burnham's Government.He criticised the plans as "illegal under international law", branding them "the crossing of a red line, as it cuts through the heart of the West Bank and risks making a Palestinian state unviable". The Prime Minister had a similar warning, saying settling in the E1 area could "imperil or end" efforts for a two-state solution.Israel had previously held off building on Palestinian land, thanks in no small part to global pressure, but extremist ministers who have joined Netanyahu's government are pushing for Israel's further expansion beyond its borders.Sa'ar has claimed that, in spite of clear international opposition, it is Israel that is being victimised. Sa'ar said: “There is a government there that is systematically acting against Israel. It has already harmed defense exports to us and imposed sanctions on ministers. What guides it is its domestic politics, and at the end of the month the Labour Party conference is convening."Speaking about how Israel could respond, he said: "There are tools..I’m saying this clearly and unequivocally. If they act, I think they will be making a major mistake. It will work the opposite way from how they may be dreaming it will work.”