Israeli forces were put on alert to prepare for a possibly hostile reaction after Israel rejected a series of amendments proposed by Lebanon to a US-brokered draft deal that it was hoped would finally end a long-running maritime border dispute between the two countries.
Israel and Lebanon are technically in a state of war and have no diplomatic relations.
Further complicating the situation is the presence of Iran-backed Hezbollah, the powerful Lebanese armed group and political party that has often fought with Israel.
“The defence minister directed [Israeli forces] to prepare for a scenario of escalation in the north, both offensively and defensively, given the developments in the negotiations on the maritime border,” said a statement from the office of Benny Gantz.
After years of indirect negotiations over competing offshore gas field claims, a deal mediated by US energy envoy Amos Hochstein was delivered to Lebanese and Israeli officials at the weekend.
Both had offered cautious praise for the proposed deal, with Lebanon's prime minister-designate Najib Mikati saying it was “on the right track to assert Lebanon's rights over all its waters”.
On Tuesday, Lebanon submitted a handful of proposed amendments, with its officials insisting that the proposed changes would not derail the deal.
But on Thursday a senior Israeli official told AFP that Israel had rejected the amendments.
“Prime Minister Yair Lapid was updated on the details of the substantial changes Lebanon is seeking to make in the agreement and instructed the negotiating team to reject them,” the official said.
“Israel will not compromise on its security and economic interests, even if that means that there will be no agreement soon.”
Lebanon's lead negotiator Elias Bou Saab told Reuters on Thursday that the deal "is 90 per cent done but the remaining 10 per cent could make it or break it," adding that he was in constant contact with Mr Hochstein.
While Hezbollah chief Hassan Nasrallah has threatened to attack the contested Karish gas field if Israel starts extraction there before negotiations are completed, even he has described the proposed deal as an “important move”.
Hezbollah threatened attacks after Israel moved a production vessel near the Karish field.
The Israeli official on Thursday emphasised that Israel was not negotiating with Lebanon over Karish and would “produce gas from the Karish rig as soon as it is possible to do so”.
“If Hezbollah or anyone else tries to damage the Karish rig or threaten us — the negotiations on the maritime line will stop immediately and Hassan Nasrallah will need to explain to the citizens of Lebanon why they don't have a gas rig for the benefit of their economic future,” the official said on Thursday.
Asked about the escalation, a US official said Washington remains engaged with both parties.
"Special Presidential Co-ordinator Amos Hochstein continues his robust engagement to bring the maritime boundary discussions to a close," a US National Security Council representative told The National.
"We remain in close communication with the Israelis and Lebanese."
The representative added that the negotiations have reached "a critical stage" and that "the gaps have narrowed".
"We remain committed to reaching a resolution and believe a lasting compromise is possible," the representative said.