Turkey has escalated the diplomatic war with Israel by ending military trade with its former ally and threatening further sanctions. The crisis centers on last year's killing of Turkish activists on a ship seeking to break Israel's blockade of Gaza.
Turkish Prime Minister Recep Tayyip Erdogan increased sanctions on Israel by announcing the immediate suspension of military trade.
He told reporters Turkey is totally suspending trade, military and defense industry relations.
Observers say the move will hurt Israel's defense industry, with bilateral trade estimated to be worth hundreds of millions of dollars. But the Turkish armed forces may also be hurt as Israel is a supplier of drones, which Turkey has increasingly used in its fight against the Kurdish rebel group, the PKK.
The escalating crisis centers on Ankara's demand for an apology for the killing by Israeli forces of nine Turks who were part of a flotilla last year seeking to break Israel's economic blockade of Gaza. But Israel refuses to apologize, saying its forces acted in self-defense.
Erdogan launched a verbal assault on Turkey's former ally.
He described the Israeli attack as "savagery" and accused Israel of acting like "a spoiled boy" in the region.
Erdogan said Turkey's naval presence would be stepped up in the region and said further sanctions could follow. Ankara has also expelled the Israeli ambassador and other high-ranking diplomats, who have been ordered to leave by Wednesday.
Until now, trade had escaped the deepening diplomatic crisis. But with non-military trade worth around $3.5 billion, Israel's central bank chief Stanley Fischer warned its economy could be hit hard by a trade war.
The crisis escalated following the publication of a U.N. report about the flotilla violence. The report criticized Israel for excessive force in its raid, but it said Israel's embargo against Gaza is legal.
Ankara rejected the U.N. report. Its publication last Friday was the deadline given by Ankara to Jerusalem for its demands to be met for an apology, compensation for families of those killed, and the lifting of Israel's economic embargo against Gaza.
Observers warn the diplomatic crisis between Turkey and Israel could deepen further with reports Mr. Erdogan is planning to visit Gaza in mid-September. Turkey's Islamic-rooted ruling AK Party has strong ties with the Hamas leadership of Gaza.