As Israel said it wanted to avoid relations worsening, Prime Minister Recep Tayyip Erdogan confirmed a halt to all military cooperation and that Turkey`s navy would conduct more high-profile patrols in the eastern Mediterranean.
Last week, Turkey announced that the Israeli ambassador Gaby Levy was being expelled and all bilateral military agreements were suspended as it angrily rejected the findings of a United Nations probe into the deadly flotilla raid.
Now in his first official reaction since that announcement, Erdogan went even further.
"We are totally suspending our trade, military, defence industry relations," he told reporters.
However his office later clarified that Erdogan did not mean a suspension to commercial ties in general but merely "in the defence industry area".
Once Israel`s closest friend in the Muslim world, Turkey has been increasingly critical of the Jewish state since Erdogan and his Islamist-rooted Justice and Development Party (AKP) came to power in 2002.
There was widespread outrage in May last year when eight Turkish nationals and an American of Turkish descent died on the Mavi Marmara, the lead ship of the six-vessel convoy taking aid to the Palestinian territory of Gaza, in a raid by Israeli special forces in international waters.
A new UN report has criticised the "excessive" force in the raid but also angered the Palestinians by upholding Israel`s right to impose a naval blockade on Gaza to prevent arms reaching the Islamist movement Hamas.
Unlike other European countries which regard Hamas as a terrorist group, Turkey has refused to blacklist the Islamists who are the rulers of Gaza and Erdogan said he may pay a visit to Gaza, entering via neighbouring Egypt.
"We are talking with the Egyptians on this matter ... A trip to Gaza is not finalised yet," Erdogan, who is due to visit Egypt next week, told reporters.
Such a visit to the tiny strip of Palestinian territory alongside the Mediterranean would be bound to infuriate Israel but Erdogan seemed in no mood for diplomacy.
"Israel has always played the role of a spoilt child," he said in reference to Israel`s attitude towards the Palestinians.
And in another display of muscle-flexing, Erdogan said that Turkish naval vessels would be more visible in the eastern Mediterranean.
"From now our vessels will be seen more often in those waters. We will see them very often", said Erdogan.
Speaking after Erdogan`s comments, an Israeli official said the government there did not want its relationship with Turkey to deteriorate any further.
"Israel does not want to see a further deterioration in its relations with Turkey," he told AFP, speaking on condition of anonymity.
"Over the past few months, there have been numerous attempts to create a positive dynamic in keeping the relationship between Jerusalem and Ankara but so far, those efforts have not succeeded."
Another Israeli official said the government was doing everything it could to try to limit the deterioration of the relationship, and not unwittingly cause it to worsen by getting into a war of words with Ankara.
Earlier in the day, Amos Gilad, a senior Israeli defence official, had sounded a warning to Turkey against pursuing "an extremist policy" while saying that the military attache would remain in place in the Ankara mission.
There has been widespread disquiet at the fallout between the two countries with the UN Secretary General Ban Ki-moon among those expressing fears that it could impact on the wider Middle East peace process.
Turkey was the first Muslim-majority country to formally recognise the state of Israel in 1949 and the two countries had held regular joint military exercises.
Turkey has also long been a favourite tourist destination for Israelis who are barred from visiting many other countries in the region.
The spat has already impacted on tourism with Turkish travellers complaining they were singled out for strip searches while flying out of Tel Aviv at the weekend.
The Israeli foreign ministry said 40 of its nationals were held for an hour and a half for questioning at Istanbul airport on Monday before they were released. (*)
Editor: Kunto Wibisono
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