European Commission President Ursula von der Leyen will put forward measures to sanction “extremist” Israeli ministers and violent settlers and to suspend parts of the EU–Israel Association Agreement relating to trade, she told the European Parliament in Strasbourg in her annual State of the Union address.
The initiative follows months of internal debate over the bloc’s response to the war in Gaza.
Von der Leyen did not name the ministers to be listed, nor specify which trade provisions would be affected. She described the package as both a practical step and a political signal, acknowledging divisions among member states but committing the Commission to act where it can. The plan also envisages the creation of a Palestine Donor Group next month, including an instrument for Gaza reconstruction.
The EU is Israel’s largest trading partner. Total trade in goods reached €42.6bn in 2024, with EU exports to Israel worth €26.7bn and imports from Israel €15.9bn. Any suspension of trade preferences would therefore carry economic weight on both sides.
Adopting the measures will be difficult. A partial suspension of trade preferences under the Association Agreement would require a qualified majority in the Council (at least 15 of 27 member states representing 65% of the EU population). Sanctions on individuals, by contrast, need unanimity, a higher threshold that has repeatedly complicated Israel-related listings. Earlier attempts to sanction violent West Bank settlers were delayed amid objections from some capitals, including Budapest and Prague.
Positions within the Union remain divergent. States such as Ireland, Spain, Denmark, Sweden and the Netherlands have pressed for a more restrictive trade stance, while others, including Germany, Hungary and the Czech Republic, have opposed such steps. That split is likely to shape the fate of the Commission’s proposal in the coming weeks.
Von der Leyen said the Commission would also pause bilateral support for Israel financed through EU instruments, while maintaining cooperation with Israeli civil society and with Yad Vashem. According to a Commission spokesperson, future allocations to Israel averaging €6m per year will be suspended, along with roughly €14m earmarked for ongoing projects. A previous move to limit Israeli access to the EU’s research funding programme did not gather sufficient backing among member governments.
The announcement drew immediate reaction from Jerusalem. Israeli Foreign Minister Gideon Sa’ar called the comments “regrettable”, arguing that Israel facilitates humanitarian assistance and that the suffering in Gaza is the responsibility of Hamas.
The legal and procedural mechanics behind the trade step are significant. Suspension of the trade chapter would remove tariff preferences granted to Israeli goods under the Association Agreement, reverting affected products to standard EU external tariff rates. Such a move has been under consideration in Brussels policy papers in recent months; its adoption would mark a notable shift in the EU’s economic engagement with Israel.
The package is framed against a backdrop of heavy civilian harm in Gaza and rising concern in EU institutions over settler violence in the West Bank. While some restrictions targeting settlers have advanced at various points since early 2024, the path to a comprehensive listings regime has been uneven, reflecting the unanimity requirement and broader disagreements over the EU’s Middle East policy.
If member states back the Commission’s approach, Brussels would need to specify the targeted individuals and delineate precisely which trade “matters” are suspended. The impact would vary by sector, depending on where tariff preferences currently apply. EU trade data indicate machinery, transport equipment and chemicals dominate bilateral goods flows, suggesting those industries would be most exposed to any change in tariff treatment.
Next steps will centre on the Council, where foreign ministers and national officials will test the prospects for a qualified majority on the trade element and unanimity on listings. The Commission’s pause of bilateral funding can proceed more quickly, but any broader change to Israel’s participation in EU programmes will still depend on political agreement among capitals. In parallel, work will begin on setting up the proposed Palestine Donor Group to coordinate reconstruction finance for Gaza.
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