Two major Israeli financial institutions, Leumi and Hapoalim, are threatening to sever ties with Palestinian banks. These banks have historically facilitated a significant portion of the West Bank's imports and exports, acting as crucial intermediaries for financial transactions.

The potential cutoff stems from a $1 billion lawsuit filed in a New York court by the families of victims of Palestinian attacks. The lawsuit alleges that the Israeli banks knowingly processed transactions for Palestinian entities that funded terrorism. The plaintiffs are seeking to hold the banks liable for aiding and abetting terror.

Israeli banks argue that complying with a court order to freeze assets belonging to the Palestinian Monetary Authority would cripple the Palestinian economy. They have warned that if forced to comply, they will have no choice but to cease all business with Palestinian banks. This move could have devastating consequences, disrupting trade, impacting salaries, and potentially leading to widespread economic instability in the West Bank.