The arms export freeze marks a dramatic change of course for the German government, which has long been one of Israel's staunchest international allies as it has sought to atone for the Holocaust.

Merz said it was "increasingly difficult to understand" how the latest Israeli military plan would help achieve the aims of disarming Hamas and freeing the remaining Israeli hostages held in Gaza.

"Under these circumstances, the German government will not authorise any exports of military equipment that could be used in the Gaza Strip until further notice," he said in a statement.

Merz added that Berlin "remains deeply concerned about the ongoing suffering of the civilian population in the Gaza Strip".

Israel has until recently enjoyed broad support across the political spectrum in Germany, a country still seeking to atone for the World War II murder of more than six million Jews.

In the period since the Hamas attack of October 7, 2023 started the Gaza war until May this year, Germany approved defence exports worth at least 485 million euros ($565 million) to Israel.

The deliveries included firearms, ammunition, weapons parts, special equipment for the army and navy, electronic equipment, and special armoured vehicles, the government said in June in response to a parliamentary request.

Merz again stressed that "Israel has the right to defend itself against Hamas' terror" and said that "the release of the hostages and determined negotiations on a ceasefire are our top priority".

"The disarmament of Hamas is essential. Hamas must not play a role in the future of Gaza."

But he added that "the even tougher military action by the Israeli army in the Gaza Strip, which was decided on by the Israeli cabinet last night, makes it increasingly difficult, from the German government's point of view, to understand how these goals are to be achieved".

- West Bank warning -

The decision marks a dramatic step for Germany, where Merz's tone towards Israel has been sharpening in recent months as the dire humanitarian situation in Gaza further deteriorated.

The conservative leader has also been under pressure from some within his own coalition government to increase pressure on Israel, particularly from members of the centre-left Social Democrats.

However, while often voicing concern, Germany had so far refrained from taking major concrete steps.

Germany has so far avoided following France, the United Kingdom and Canada, who have announced plans to recognise a Palestinian state in September.

On a visit to Israel last week, German Foreign Minister Johann Wadephul maintained Berlin's long-standing position that recognition could come only after a process of negotiation between Israel and the Palestinians but added that the process "must begin soon".

Berlin has also opposed the suspension or termination of the EU-Israel Association Agreement, which had been under review by the bloc.

International concern has been growing over the suffering of Palestinians in Gaza, where a UN-backed assessment has warned that famine is unfolding.

German airforce planes have in recent days joined other countries with airdrops of humanitarian aid over the war-battered coastal territory.

Merz said that "with the planned offensive, the Israeli government bears even greater responsibility" for providing aid to Gaza's civilians.

He reiterated Germany's call for comprehensive access to Gaza for "UN organisations and other non-governmental institutions".

Merz also said that "the German government urges the Israeli government not to take any further steps toward annexing the West Bank".

Last month, 71 members of Israel's 120-seat parliament, including members of Prime Minister Benjamin Netanyahu's right-wing coalition, passed a motion calling on the government to annex the West Bank.