Israeli officials are concerned that the Palestinian campaign against buying produce from the settlements will escalate into a larger international boycott on Israeli goods.
In recent weeks, the Palestinian Authority published a booklet with a list of Israeli companies that operate in the West Bank and on the Golan Heights, calling upon its people not to buy their products.
Inspectors of the Palestinian Economics Ministry have begun visiting shops and confiscating black-listed products. Shop-owners have so far been issued only with warnings, but new laws now threaten them with prison terms and heavy fines if they continue selling products from the settlements.
The campaign is supported by Palestinian Prime Minister Salam Fayyad who participated in a public burning of settlement produce.
The heads of the settlers' council have attacked the Palestinian campaign as "economic terror" and blamed Mr Fayyad for "trying to upset the calm and mutually beneficial relations we have with many of our Palestinian neighbours". The settlers are particularly incensed by the attempts of the Palestinian Authority to forbid their people from working at the settlements, though this will be harder to enforce as thousands of Palestinians derive their livelihood in this way.
Prime Minister Binyamin Netanyahu blamed the Palestinian Authority this week of "trying to stop the economic peace". He said that Palestinian opposition to Israel's acceptance into the international Organisation for Economic Cooperation and Development two weeks ago "is opposed to our intentions to broaden both the economic and political peace processes".
This week, pro-Palestinian groups in Italy claimed to have persuaded two large supermarket chains to boycott Israeli produce. They accused Israeli exporters of mixing products from the West Bank with those from within the Green Line, thereby evading an EU ruling that settlement goods should not be exempt from certain tariffs, as the rest of Israeli products are.