Since Hamas siezed power in June 2006, Israel imposed a military blockade on Gaza, tightened restrictions on the movement of Palestinians, and began confiscating customs revenues.
Rights group Amnesty International warned that the measures have caused a significant deterioration in living conditions for Palestinian inhabitants of the occupied territories. It said that poverty, food aid dependency, health problems and unemployment were reaching crisis levels.
Israel began withholding some $50 million a month in duties and taxes collected on behalf of the Palestinian Authority after Hamas, which it considers a terror group, came to power in June 2006.
The Palestinian economy, hampered by security restrictions put on Palestinian travel and exports, is near collapse. The Palestinian gross domestic product dropped by 6.6 percent in 2006, poverty rose by 30 percent and unemployment was over 30 percent.
Since 1999, when Israel reinvaded the West Bank and set up various security restrictions in the name of protecting its citizens, the Palestinian gross domestic product per capita has dropped 40 percent in real terms, according to the International Monetary Fund -- a severe depression.
Last year, an Israeli human rights group slammed the country's military for devastating the Gaza Strip's lucrative fishing industry by harassing, humiliating, and even shooting Palestinian fishermen.
B'Tselem said the Israeli Navy has illegally prohibited all fishing since militants captured soldier Gilad Shalit in a cross-border raid in June 2005.
Israel's January fuel cut shut down Gaza's sole power plant, plunging the Strip into darkness and disrupting electricity generation, water supply and sewage treatment.
In June 2006, Israel bombed the Gaza Strip's power station as part of efforts to recover a seized soldier a war crime and collective punishment.
B'Tselem, Israel's main rights group monitoring the Palestinian territories, called it "an act of collective punishment" and "a war crime in international humanitarian law, as the attack was aimed at a purely civilian object."
The attack had a devastating effect in the densely populated territory, with electricity being rationed to a few hours a day during the hot summer months. The offensive also cut water supplies to a few hours a day and brought sewage treatment to a halt.
The operation of Gaza's water and sewage facilities has also been impaired by military incursions, import restrictions, extensive damage to Gaza power station and interruptions to fuel supplies, the Swiss-based International Committee of the Red Cross said in September last year.
An assessment of nine hospitals in the Gaza Strip in September 2007 found that the hospital infrastructure was deteriorating rapidly, the International Committee of the Red Cross (ICRC) said.
"Many facilities, diagnostic machines and other equipment are either out of order or in bad condition, as it is no longer possible to maintain them properly," the ICRC said.
The transfer of Gaza patients allowed to go into Israel, Jerusalem and the West Bank for medical treatment had slowed to a "trickle", compared with the previous daily rate of 30 to 40 since the Hamas takeover in June, according to the ICRC.