Israeli Prime Minister Benjamin Netanyahu has termed the European Union's (EU) decision to label products made in Israeli settlements as "hypocritical" and "double standard", while the country's representative to the UN has called it "biased" and "shameful".

The EU move is not expected to have any significant impact in a commercial sense as products made in the occupied West Bank, East Jerusalem and the Golan Heights that would now require special labelling, account for "less than 1% of Israel's $13billon in annual exports to the bloc's 28 countries."

The products would include wine, honey, eggs, poultry, fresh vegetables, fruits and cosmetics.

But, it is bound to trigger a diplomatic row between the EU and Israel, with the Jewish state's foreign ministry saying the decision "may also have implications for Israel-EU relations."

The products would include wine, honey, eggs, poultry, fresh vegetables, fruits and cosmetics.

"The European Union, in line with international law, does not recognise Israel's sovereignty over the territories occupied by Israel since June 1967, namely the Golan Heights, the Gaza Strip and the West Bank, including East Jerusalem, and does not consider them to be part of Israel's territory, irrespective of their legal status under domestic Israeli law," says Al Jazeera, quoting from what it calls interpretive notice of the latest EU move.

The Israel ministry of foreign affairs issued a statement on the EU decision on Wednesday, condemning it. 

"Israel condemns the decision of the European Union to label Israeli products originating from areas that are under Israeli control since 1967. We regret that the EU has chosen, for political reasons, to take such an exceptional and discriminatory step, inspired by the boycott movement, particularly at this time, when Israel is confronting a wave of terrorism targeting any and all of its citizens.

"It is puzzling and even irritating that the EU chooses to apply a double standard concerning Israel, while ignoring that there are over 200 other territorial disputes worldwide, including those occurring within the EU or on its doorstep. The claim that this is a technical matter is cynical and baseless," the statement said.