The European Union's ambassador to Israel has warned the Jewish State that it would likely endure "increasing isolation" if peace talks with the Palestinians collapse.

Lars Faaborg-Andersen told Israel's channel 2 TV Monday that such a scenario wouldn't necessarily be a result of European policy, but rather the actions of private companies.

His comments echo those made by U.S. Secretary of State John Kerry, who is brokering the talks and who warned last week that the boycott would expand if talks fail.

The warnings caused uproar in Israel, with some officials condemning the remarks while others recommended the government take note.

A small but growing number of European businesses have cut trade with firms involved in West Bank settlements.