Israel's administration doesn't have any more sanctions planned for New Zealand after recalling ambassador Itzhak Gerberg and blocking NZ's ambassador from travelling to the Middle Eastern nation.
Diplomatic relations soured over the Christmas holiday period after New Zealand co-sponsored a resolution in the UN Security Council criticising Israeli settlements as violating international law and undermining a two-state solution with Palestine.
Israel's Prime Minister Benjamin Netanyahu ordered his foreign ministry to temporarily limit ties with the 12 UNSC members that voted in favour of the resolution, being Britain, France, Russia, China, Japan, Ukraine, Angola, Egypt, Uruguay, Spain, Senegal and New Zealand.
Earlier, he called New Zealand Foreign Minister Murray McCully and described New Zealand's move as a "scandalous decision", according to unnamed Western diplomats cited by Israeli news site Haaretz.
"If you continue to promote this resolution from our point of view it will be a declaration of war. It will rupture the relations and there will be consequences," Mr Netanyahu is reported to have said.
The Israeli embassy in Wellington categorically denies Mr Netanyahu made any such statement, and Mr McCully's office won't reveal details of the conversation.
No further sanctions are planned, the Israel Embassy says.
"Other than the fact that the ambassador has been recalled and the fact that the New Zealand ambassador to Israel Jonathan Curr is not allowed for the moment to visit Israel, there are no further sanctions," embassy spokeswoman Patricia Deen said.
"We're just continuing with what we were doing, business as usual, and that's really it at this moment."
Mr McCully met with Netanyahu last month during a trip to the Middle East, where the Israeli PM stressed the need for direct negotiations with Palestinians to find a two-state solution.
The two nations signed a film co-production agreement this year, and are also on the verge of signing an innovation agreement leading to joint research and development, which was pushed for by New Zealand's chief scientist Peter Gluckman.
He was part of a New Zealand Innovation mission to Israel in June led by Spark chief executive Simon Moutter.
Ms Deen said current initiatives are still going ahead, "particularly in regard to the business innovation agreement, so that's all go."
New Zealand exported $26.2 million of goods to Israel in the year ended June 30, and imported $115.5m of goods.
Investment flows were much smaller, with just $1m of New Zealand investment into Israel in the March year and $20m of Israeli investment in New Zealand.