The Israeli prime minister, Benjamin Netanyahu, has announced a series of punitive steps against Palestinians in the wake of the deadliest terrorist attack in Jerusalem in years in which a gunman killed seven people outside a synagogue.

In a statement issued after the weekly cabinet meeting on Sunday, Netanyahu’s office said that Israel’s security agency would explore “additional deterrent measures regarding the families of terrorists that express support for terrorism”, including the revocation of Jerusalem residency rights and Israeli citizenship, and legislation allowing employers to dismiss workers who have “supported terrorism” without the need for a hearing.

Israeli youths hold a candlelit vigil at the site of the attack in occupied East Jerusalem

Other actions outlined by the cabinet include stripping family members of attackers of social security and health benefits, changes in policy to make it easier to demolish homes of Palestinians who carry out terrorist attacks, and the “strengthening of settlements” in the occupied West Bank, on which no further details were given.

All of the measures are illegal under international law, and are likely to inflame tensions with the Palestinian public and the Palestinian Authority (PA), which controls parts of the occupied West Bank, at a time when the region already stands perilously close to escalation.

Friday’s shooting in the occupied East Jerusalem neighbourhood of Neve Yaakov, which killed seven and injured three, followed the deadliest single Israeli army raid in the West Bank in decades. The unusually fierce attack on militants in the Jenin refugee camp left nine Palestinians dead, including two civilians, and triggered a wave of tit-for-tat violence, including the exchange of rocket fire between the Islamist-controlled Gaza Strip and Israel in the early hours of Friday.

Several more incidents have been reported since the synagogue attack, including the shooting and wounding of two people near Jerusalem’s Old City by a 13-year-old Palestinian, the hospitalisation of four Palestinians attacked by an Israeli settler near Nablus, and a shooting at a settler restaurant near Jericho on Saturday in which no one was hurt, but the assailant was killed.