Israel and Washington were at loggerheads on Sunday after senior Israeli figures attacked US Secretary of State John Kerry for warning of a growing boycott threat if peace talks fail.

The latest spat erupted a day after Kerry warned of the potential economic impact on Israel if theUS-brokered negotiations with the Palestinians collapsed, in which he made reference to "talk of boycotts."

His remarks sparked several outspoken reactions from senior cabinet ministers in Israel, which prompted an unusually pointed response from the US State Department urging Kerry's critics to get their facts straight.

"For Israel there's an increasing de-legitimisation campaign that has been building up. People are very sensitive to it. There are talk of boycotts and other kinds of things," the US diplomat warned at a security conference in Munich on Saturday.

His remarks quickly came under attack by a series of hardline Israeli ministers, one describing them as "offensive" and another accusing the US diplomat of working "to amplify" the boycott threat.

And even Israeli Prime Minister Benjamin Netanyahu told the cabinet that "attempts to impose a boycott on the State of Israel are immoral and unjust."

"Moreover, they will not achieve their goal."

But US State Department spokeswoman Jen Psaki hit back at Kerry's critics.

Kerry, she said, had demonstrated steadfast support of Israel for over 30 years, "including staunch opposition to boycotts" and his remarks in Munich had merely "described some well-known and previously stated facts about what is at stake for both sides if this process fails, including the consequences for the Palestinians."

"His only reference to a boycott was a description of actions undertaken by others that he has always opposed," she said.

"Secretary Kerry has always expected opposition and difficult moments in the process, but he also expects all parties to accurately portray his record and statements."

Earlier, Intelligence Minister Yuval Steinitz lashed out at Kerry in remarks carried by Israel's army radio.

"What Kerry said is offensive, unfair and intolerable," he said.

"You can't expect Israel to negotiate with a gun at its head while it discusses issues critical to its diplomatic and security interests."

And Economy Minister Naftali Bennett of the far-right Jewish Home party, which is part of the ruling coalition but against territorial concessions to Palestinians, accused Kerry of taking sides against Israel.

"There is no nation that would give its country up over economic threats, and neither will we," he said in a statement issued late on Saturday.

"We expect our friends in the world to stand by our side in the face of the anti-Semitic boycott attempts, not amplify them."

BDS aims for South Africa success

A growing number of governments and businesses have recently said they will not trade with Israeli firms with ties to Jewish settlements, highlighting the creeping success of a Palestinian-led boycott campaign.

The so-called BDS movement -- boycott, divestment and sanctions -- works to convince governments, businesses and celebrities to cut ties with Israeli companies active in the occupied Palestinian territories, in a bid to repeat the success of the boycott which ended apartheid in South Africa.

Last week, US actress Scarlett Johansson was forced to chose between being an ambassador for Oxfam and taking on a new role as the public face of Israel's SodaStream, which has a factory in the West Bank, after the international aid group said the two roles were "incompatible."

She resigned her position at Oxfam.

On the same day, Norway's sovereign wealth fund blacklisted two Israeli companies involved in construction in annexed east Jerusalem.

Since January 1, the European Union has blocked all grants and funding to Israeli entities operating beyond the pre-1967 war lines, sparking growing alarm in Israel.

Kerry coaxed Israel and the Palestinians back to the negotiating table in late July 2013 for nine months of direct talks which will end in April. So far, there has been very little visible progress.

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