Ed Miliband is set to announce sanctions targeting settlements in the West Bank in a Commons statement today.
The foreign secretary is expected to present a “reset” of Britain’s relations with Israel.
The UK”s independent reviewer of terror legislation has already raised concerns over the impact on Britain’s Jewish community of making Israel a “pariah state” a year on from the Heaton Park attack.
Ministers have suggested goods coming out of the settlements in the West Bank could be subject to trade restrictions as part of the changes.
Prime minister Andy Burnham discussed the Middle East with US President Donald Trump in a phone call on Monday ahead of Britain’s intervention, which risks drawing criticism from Washington.
Downing Street said Mr Burnham had set out “the UK’s commitment to working towards peace and security in the region” and stressed the importance of the two-state solution, but made no mention of how the president responded.
The Times reported that the Trump administration would make a statement attacking the intervention.
Tensions in the West Bank have flared in recent months, with Israeli settlers involved in violent disputes with Palestinians.
Labour lost the support of many of its left-wing backers under Sir Keir Starmer over his initial response to Israel’s military action in Gaza following Hamas’s October 7 attack on Israel in 2023.
Prime Minister Mr Burnham, who was among senior party figures to have called for a ceasefire by late October that year, previously suggested he would change the Government’s approach to the conflict soon after coming to office in July.
He has voiced particular concerns about the E1 settlement, where Israel has given final approval for a controversial project that it is claimed would effectively separate the occupied West Bank from East Jerusalem.
Asked about the intervention, Jonathan Hall KC, the independent reviewer of terrorism legislation, told BBC Newsnight: “From a terrorism perspective, I mean, obviously one’s got to think about international cooperation.”
He added: “That is a really big deal, particularly with Iran, thinking about intelligence. On the other hand, I suppose it’s also true to say that some settler violence does amount to terrorism.”
Mr Hall also expressed concern about the potential impact on Britain’s Jewish communities, adding: “I think there is a risk that if you stir the pot by making Israel a pariah state, then that will bring that flame up again, which we saw.
“Remember, it was only a year ago that there was the attack at Heaton Park. And I’ve been very worried about de-legitimising anyone who’s Israeli, certainly, and Jews, many of whom support Israel, and painting a bit of a target on the back.
“Now, I’m sure the government will be very careful, I hope they will be, in the way in which they describe this, but that is a concern."
Shadow foreign secretary Tom Tugendhat previously said the plans could put Britain’s national security at risk and make it harder to fight terrorism.
He told the Telegraph: “It’s worth remembering that Israel is one of our most important intelligence partners, and has been for many, many years.
“I can tell you, as security minister, a lot of incidents did not happen because of co-operation with intelligence sources in Israel, who helped us to protect British people from terror attacks.”
Israel has already threatened to retaliate if the UK imposes sanctions over the potential expansion of settlements in the West Bank, with foreign minister Gideon Saar warning: “If Britain acts against Israel, Israel will act against Britain.”
Itamar Ben-Gvir, Israel’s hard-line public security minister, called on the country’s prime minister Benjamin Netanyahu to publicly recognise the Falkland Islands as “Argentine territory under occupation, which the British violently steal from the Argentine people”.
He wrote on X: “The British are not content with merely occupying the territory; they also carry out oil drilling there and steal the money from the Argentine people.
“I call upon Prime Minister Benjamin Netanyahu to recognize Argentina’s sovereignty over the Malvinas Islands and to impose sanctions on Great Britain as long as the occupation continues.”
Meanwhile, Israel’s finance minister Bezalel Smotrich called for the expulsion of the British ambassador.
“Expel the British ambassador tonight!,” he wrote on X on Monday evening.
“We will not be a doormat trampled by an antisemitic government, in a country conquered by radical Islam, trying to save itself from economic and social decline by attacking Jews and the State of Israel.
“The British Mandate in the Land of Israel is over.”
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