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Palestinian Prime Minister Mohammed Shtayyeh told journalists that the Palestinian Authority will declare a state along the 1967 borders if Israel proceeds with threats to annex the West Bank.
Israel's top court has voided a law that would retroactively legalise some 4,000 settler homes built on private Palestinian land in the West Bank.
Israel and Hezbollah exchanged fire along the Lebanese border after a week of rising tensions, sparking fears of an escalation and prompting concern from world powers.
Israel said it returned fire on Sunday after anti-tank missiles from Lebanon hit targets inside its territory, raising fears of a serious escalation with Hezbollah.
Israel's Shin Bet security agency said that an operation with the Israeli army and police had led to the capture of a Palestinian it said killed a soldier last month.
Forty prominent British Jewish figures have written a letter opposing Israel's plans to annex the occupied West Bank.
Speaker of the House Nancy Pelosi said Israeli annexation of the West Bank would undermine US national security interests.
Israel's intelligence community has lauded Yossi Cohen for spearheading efforts to forge the agreement, according to local media reports.
The UAE has said Israel's plan to annex large parts of the West Bank would 'constitute a rejection of the international... consensus towards stability and peace'.
Syria, Turkey, Iran and Russia have rejected President Trump's sudden announcement that it is time to recognise the illegal Israeli occupation of the Golan Heights.