The defence ministry has recommended imposing further restrictions of the movement of Palestinians. Israel may also stop the transfer of taxes worth millions of dollars that it collects for the Palestinians. Israel says it will not deal with Hamas unless it gives up its armed struggle and recognises the state of Israel. Hamas won the Palestinian parliamentary elections in January. Hamas has so far rejected demands that it recognise Israel and renounce violence, but it is observing an informal truce with Israel.
The cabinet, chaired by acting Prime Minister Ehud Olmert is meeting to discuss what other approaches it should take if Hamas assumes control of the Palestinian Authority after the inaugural session of the Palestinian Legislative Council on Saturday. The Defence Ministry has suggested turning the Gaza-Israel crossing-points into international borders.
This could lead to tougher security checks and restrict the movement of Palestinians. Another option is stopping the transfer of millions of dollars worth of taxes which Israel collects on behalf of the Palestinians. While Israel considers its approach, reports suggest Hamas has chosen Ismail Haniya, one of its leaders in Gaza, to be the next prime minister.
Hamas has yet to make a formal announcement of the nomination. Mr Haniya told Reuters that no decision had been made. "Nothing official has been reached so far, and when a decision is made, it will be published, " he said. Hamas leaders plan to appoint a cabinet within a fortnight of the parliament's first session. An inaugural session of the Palestinian Legislative Council is due to be held on Saturday.