Defense Minister Avigdor Lieberman declared the Palestine Liberation Organization's main financial body a terrorist organization on Thursday, infuriating the Palestinians as US President Donald Trump's envoy wrapped up his first visit to the region.
The fund makes monthly payments to about 35,000 families of Palestinians killed and wounded in its long-running conflict with Israel, including suicide bombers and other militants who targeted civilians and soldiers.
"The decision to declare the fund a terrorist organization stems from its continuing and ongoing activity in providing massive support for elements responsible for committing severe acts of terrorism against Israel," Lieberman said.
"As of today, all necessary actions will be taken in Israel and overseas in order to seize and confiscate property and assets designated for, or belonging to, the fund," he added.
The Palestinian National Fund's main offices are in Jordan, and it was not immediately clear how the measures would be implemented.
Palestinian President Mahmoud Abbas condemned the move, which came after US envoy Jason Greenblatt wrapped up several days of meetings with both sides aimed at reviving the peace process, which last collapsed in 2014.
Abbas called it "an Israeli attempt to obstruct and sabotage US efforts" to relaunch peace talks. He said it is a "fundamental violation" of interim agreements signed between the PLO and Israel two decades ago, and called on "all countries of the world to reject this declaration to preserve the agreement."
The "martyrs' fund" was set up in 1967 by the Palestine Liberation Organization, the group that formally represents all Palestinians. It and another fund supporting families of Palestinians imprisoned by Israel are nominally PLO institutions, but are funded by the Western-backed Palestinian Authority, which governs parts of the West Bank.
The fund for families of several thousand Palestinians held for alleged anti-Israeli activities, from stone-throwing to shooting attacks and bombings, had a 2016 budget of $125 million, according to the website of the Palestinian Authority's Finance Ministry.