Steps by European companies and governments to restrict business with West Bank settlements are rekindling longstanding fears in Israel of a broader economic boycott over its treatment of the Palestinians.

After facing criticism from activist groups in the Netherlands, Vitens, the Dutch drinking-water company, said this week that it was cutting ties with Mekorot, Israel’s national water company, because it had business in the occupied West Bank.

Separately, UK Trade & Investment, the business promotion body, published guidance last week warning companies of the risks of doing business wi