The Israeli government is considering abrogating the Oslo Accords if the Palestinian Authority gains recognition of an independent state at the United Nations General Assembly in September.
The Oslo agreement, signed in 1993, aimed to create a framework for talks between the two sides. A move to revoke the deal is being considered along with other possible responses to the UN move, the Prime Minister's Office has confirmed.
The assumption within the government is that the PA will indeed request the Arab League to table the motion for recognition of an independent state at the UN in September, and that it will receive an overwhelming majority.
Although the vote is not yet on the agenda for the general debate at the Assembly, Palestinian representatives will meet Arab foreign ministers in Qatar next Thursday and are expected to decide on the draft resolution.
Prime Minister Benjamin Netanyahu is trying to convince as many Western governments as possible to oppose or abstain from the vote, but that will not prevent the inevitable outcome.
Mr Netanyahu has instructed the National Security Council to formulate a number of alternative responses for "the day after" the vote at the UN. Aside from cancelling the Oslo Accords, proposals include annexing parts of the West Bank and ending financial co-operation with the PA.
President Peres, who as foreign minister in 1993 was the godfather of the Oslo Accords, responded that there was "no basis" for cancelling the agreement.
Former National Security Council chief Giora Eiland said that such a move would have little relevance since, in the West Bank, "Israel and the PA co-operate and share responsibility, based on their joint interests, not the Oslo Accords."
Meanwhile, the IDF is also upping its preparations for a possible escalation in violence around the time of the UN vote. The assumption within the army's higher echelons is that an outbreak of violent protests will not be immediate and that they will not be facing violence on a similar level to that of the Second Intifada, which began in September 2001. Despite this, the army is preparing for all eventualities.