"We all agree that the situation in Gaza continues to go in the wrong direction. We must use the tools at our disposal to force the Israeli government to change course," said Kallas."I want to make it clear that the goal is not to punish Israel. The goal is to improve the humanitarian situation in Gaza."

"Suspending trade benefits and imposing sanctions on extremist ministers, violent settlers and members of Hamas would send a strong signal from the European Union: this war must end, the suffering must end, and the hostages must be released," she said.

An internal EU review concluded that Israel's actions violate the EU-Israel agreement, which obliges both parties to respect human rights.

However, it is unclear whether the proposal can gain the necessary support among the EU-27 member states.

The suspension of trade preferences for Israel would need to be approved by 15 member states, together representing at least 65% of the EU's total population.

The EC said it would take immediate action of its own, freezing around €20 million in bilateral aid to Israel. The move will not apply to funds intended to help civil society groups and Israel's Holocaust memorial, Yad Vashem.

"The terrible events taking place every day in Gaza must end," said EC President Ursula von der Leyen.

"An immediate ceasefire, unrestricted access to all humanitarian aid and the release of all hostages held in Hama are needed," she said.

Under the new proposals, Brussels is demanding the suspension of those parts of the cooperation agreement with Israel that allow for tariff reductions on goods imported from that country.

According to officials, this will affect more than a third of Israel's exports to the EU, worth around six billion euros, including important agricultural products such as dates and nuts.

The EC is also calling for an asset freeze and visa ban on far-right Israeli government ministers Itamar Ben Gvir and Bezalel Smotrich, whose"extremist" rhetoric is blamed for inciting violence.

EU countries are divided on how the EU should respond to the situation in Israel and the Gaza Strip.

A previous proposal to suspend funding for Israel in the field of research has not received sufficient support so far.

The Israeli army launched a ground assault on Gaza City on Tuesday night, advancing towards the city center, after weeks of bombing and airstrikes.

Israel has already called on Brussels not to move forward with the sanctions proposals.

"Pressure with sanctions will not work," Israeli Foreign Minister Gideon Saar wrote in a letter to Leyen.