The announcement could lead to the cancellation of the deal, one of the biggest to emerge from the normalisation of ties between Israel and the UAE last year. Environmentalists had petitioned Israel's Supreme Court to block the agreement.

Signed between an Israeli state-owned company and a venture with Emirati and Israeli owners, the deal allows for oil unloaded from tankers in the Red Sea port of Eilat to be moved across Israel in an existing pipeline to the Mediterranean coast.

Responding on Thursday to the Supreme Court petition, Prime Minister Naftali Bennett's government said it would not intervene and would instead allow the Environmental Protection Ministry to play its regulatory role limiting activities that pose ecological risks.

"We blocked the entry of dozens of oil tankers into the Gulf of Eilat," Environmental Protection Minister Tamar Zandberg said in a statement, adding that Israel "will not become a bridge of pollution in an era of climate crisis".

Israel's energy minister had previously come out against the deal, citing ecological risks to Eilat's fragile coral reefs.

The Israeli state-owned company involved in the deal, Europe Asia Pipeline Company (EAPC), said the deal has "significant geopolitical and economic advantages for Israel and its citizens."

EAPC said it was committed to protecting the environment and would continue its dialogue with the Environmental Protection Ministry over its pipeline activities.

The other company involved in the deal, MED-RED Land Bridge, did not immediately provide comment.