Israel warned on Saturday that it would cut the supply of water and electricity to the Gaza Strip if Fatah and Hamas form succeeded in forming a unity government.

Israel warned on Saturday that it would cut the supply of water and electricity to the Gaza Strip if Fatah and Hamas form succeeded in forming a unity government.

"The foreign ministry is examining the possibility of Israel pulling out of the Gaza Strip in terms of infrastructure," Israeli Deputy Foreign Minister Danny Ayalon told the daily Yediot Aharonot website.

On Friday, Israeli ministers decided to maintain a freeze on the transfer of tens of millions of dollars to the Palestinian Authority hours after Palestinian president Mahmud Abbas held talks with Hamas chief Khaled Meshaal.

"If the Palestinians have signed an agreement over a unity government, it would make a transfer of funds impossible," AFP quoted a senior Israel government official as saying.