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The terror group Hamas has reportedly agreed to halt its attempts to carry out attacks against Israelis from the West Bank under the Palestinian reconciliation agreement signed Thursday with its rival faction Fatah, which controls the Palestinian Authority.

In an online posting later, Netanyahu warned that the deal would make "peace much harder to achieve". And the Palestinian Authority is hoping that reconciliation will allow the Palestinian territories to have a unified voice to press Israel for an independent state.

"Israel should end its siege on Palestinian lands and avoid any movement that would harm the reconciliation process", he said.

"Israel demands that these conditions be met and the immediate release of Israeli civilians Avra Mengistu and Hisham a-Said, who are being cruelly held by Hamas, and the remains of fallen IDF soldiers Oron Shaul and Hadar Goldin".

Mr Blair was appointed Special Envoy of the Middle East Quartet, which comprises of the US, EU, UN and Russian Federation, the day he resigned as Prime Minister.

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In a report Sunday, the London-based Pan-Arab daily Asharq al-Awsat quoted "knowledgeable" Palestinian sources who said the two sides had agreed that major decisions such as signing a peace deal or starting a violent conflict with Israel would be made collectively.

For the first time, Tony Blair has said he and other world leaders were wrong to give in to Israeli pressure to boycott Hamas after it won the Palestinian elections in 2006.

Abbas was adamant before the talks began that no unity government would be formed without Hamas completely disarming. "This must be stressed ahead of expected global pressure to resume negotiations in light of the Palestinian agreement".

There has been a period of relative calm between Israel and Hamas in the Gaza Strip since 2014's confrontation between the two, with the militant group instead focused on carrying out acts of violence in the West Bank and Israel. In return, Cairo pressed Hamas to move forward on reconciliation with Fatah.

The deal comes a month after Hamas dissolved the committee which runs the Gaza Strip and said it was willing to work towards reconciliation with its West Bank rivals. A year of tense unity government administration ended after fights in 2007 which led to Hamas expelling Fatah from the coastal enclave altogether.