TEL AVIV—Israel's Prime Minister Benjamin Netanyahu on Sunday ordered the country's foreign ministry to suspend diplomatic contact with European Union bodies engaged in Israeli-Palestinian peace efforts, responding to the bloc's decision to label products made in the occupied territories.

Mr. Netanyahu, who also acts as foreign minister, told the ministry to reassess the involvement of EU bodies "in everything that is connected to the diplomatic process."

"Until completion of the reassessment, the Prime Minister has ordered a suspension of diplomatic contacts with the EU and its representative in this matter," the foreign ministry said in a statement.

The move to suspend diplomatic relations on issues related to the peace process wouldn't affect Israel's relations with individual countries in the European Union, the Israeli foreign ministry added in its statement.

The office of EU foreign policy chief Federica Mogherini had no comment on the matter at this time.

Earlier this month, the EU's executive laid out guidelines for labeling products from Israeli settlements in the occupied West Bank. Israel's foreign ministry summoned the EU ambassador for a meeting in response to the long-expected move.

Israel's foreign ministry also had warned that labeling products would lead to Israeli questions about an EU role in future peace negotiations, although all sides concede peace negotiations aren't imminent.

Ms. Mogherini has made peace talks between the Israelis and Palestinians a diplomatic priority since assuming her post in November last year. Shortly after taking the role, she made her first official trip outside of Europe to visit Mr. Netanyahu and Palestinian Authority President Mahmoud Abbas.

She also has sought to rejuvenate the Middle East Quartet group, which brings together the EU, the U.S., Russia and the United Nations, and reached out to Arab states such as Jordan, Egypt and Saudi Arabia to build momentum for peace negotiations.

"It is now up to the Israeli and the Palestinian leadership to demonstrate with acts that their commitment to the two-state solution is real and not just fake, not just a slogan," Ms. Mogherini told EU lawmakers last month in Strasbourg.

It isn't clear if the EU's role in the quartet would be affected by the Israeli decision. The Israeli foreign ministry declined to comment further on its statement.

The last round of Israeli-Palestinian negotiations, brokered by the U.S., fell apart last year as the two sides failed to agree on a key issues. Palestinian officials have since called for multilateral negotiations, similar to those on a nuclear deal between Iran and world powers and which included the EU. Israeli officials have said Mr. Netanyahu is willing to sit down with Mr. Abbas for negotiations.

No peace talks are currently planned, however, and the White House has said a peace deal won't happen before President Obama leaves office in early 2017 and resumption of talks are also unlikely.

Western diplomats, including from the EU, have lobbied for smaller measures that might bring the Israelis and Palestinians to the table for talks. These include a cessation of settlement building and allowing the Palestinian Authority more control in parts of the West Bank.

But a two-month spate of violence in the West Bank and Israel has overshadowed any talk of a deal. U.S. Secretary of State John Kerry last week visited Jerusalem and Ramallah to talk to both sides about taking steps to end the current tension and return to talks.

The guidance on settlement-produced products obliges European importers to label agricultural and some industrial products for sale in the 28-nation bloc. The plan was delayed by three years as the U.S. and Israel pressured the EU to reject the plan.

EU diplomats have said the guidelines are unlikely to lead to further measures against Israel's settlement expansion in the Palestinian territories, which the bloc deems illegal.

A senior EU official previously acknowledged that the labeling decision touched on an emotional issue for Israel. But the official didn't expect the move to have a lasting impact on ties.

Laurence Norman contributed to this article.

Write to Rory Jones at rory.jones@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

November 29, 2015 20:25 ET (01:25 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.