Israeli Prime Minister Benjamin Netanyahu has ordered his government to freeze the country's $2 million annual funding of UNESCO after the organization recognized the Palestinian Authority's political status and granted it full membership.

Thursday's decision came two days after the Israeli Cabinet announced it would expedite construction of Jewish settlements in East Jerusalem and the West Bank and suspend the transfer of tax revenue it collects for the Palestinian Authority.

The Palestinian United Nations observer Thursday urged the U.N. Security Council to take action against Israel for accelerating settlement building and what he said was “illegally hijacking” Palestinian tax revenue.

Riyad Mansour warned that if Israel's actions are not stopped immediately, the region may see further “escalation and provocation.” He described events between Israel and the Palestinians as “very volatile.”

On Monday, the United States announced it would stop funding UNESCO, including a planned $60 million transfer to the U.N. cultural agency this month. Canada is halting voluntary contributions to the agency but will not be cutting federal funds.

Israel and the U.S. strongly opposed the Palestinian UNESCO bid. They say the only way for the Palestinians to attain internationally recognized statehood is after a deal is reached through direct talks with the Israelis.

On Tuesday, Israel ordered the building of 2,000 new housing units in occupied East Jerusalem and the West Bank. Mr. Netanyahu said the new construction will be in areas he believes would remain in Israel following any future peace accord.

A senior Israeli official said the moves were a punitive response to what he called recent unilateral actions by the Palestinians.

The United States criticized UNESCO's vote as “premature,” saying it undermines the international community's goal of a comprehensive Middle East peace plan. The agency draws nearly a quarter of its funding from the U.S.