By James Mackenzie

JERUSALEM (Reuters) – U.S. President Joe Biden‘s announcement that he would withhold arms supplies if Israel went through with its assault of Rafah drew a defiant reaction on Wednesday alongside unease at the possible longer term fallout from the open clash with Israel’s most vital ally.

The warning came after months of increasingly urgent calls for restraint by officials from the administration, which has been paying a heavy political price for its continued support for Israel despite the mounting death toll in Gaza.

Israeli Prime Minister Benjamin Netanyahu said Israel would fight “with our fingernails” if necessary and his ministers united in defying the warning.

Whether Biden’s threat to withhold supplies of bombs and artillery shells is carried out, the ability of Israeli forces to operate in Rafah, the southern Gaza city where more than one million displaced Palestinians are sheltering, may not be immediately impacted.

Israel’s chief military spokesperson, Rear Admiral Daniel Hagari, said Israeli forces had sufficient ammunition for the Rafah operation and other planned operations.

“When we speak about difficulties within the Israeli Defence Forces, it would be for the long range or the medium one,” said Yaakov Amidror, a former army general and national security advisor to Netanyahu.

“For war tomorrow in Gaza or war tomorrow in Lebanon, if that happens, that will not make any difference.”

The war, which began on Oct. 7 with a devastating assault on communities around Gaza by Hamas gunmen who killed some 1,200 people and abducted more than 250 hostages, has fired protests around the world as the death toll from Israeli campaign in Gaza has neared 35,000.

With international pressure mounting on Israel to accept a ceasefire deal with Hamas, the political weight of a step that came after weeks of increasingly urgent appeals by the Biden administration for restraint was unmistakeable.

U.S. officials had already confirmed that deliveries of some precision weapons had been held up as a sign of the increasing unhappiness of the Biden administration at Israel’s refusal to hold back.

Israeli media quoted officials as saying the push to call off the Rafah operation risked removing one of Israel’s last remaining bargaining chips with Hamas, which still holds more than 130 Israelis hostages.

LONGER TERM CONSEQUENCES

With war brewing on the northern border with Lebanon, where Israeli forces have been exchanging fire with the Iran-backed Hezbollah militia for months, the longer term consequences could be just as serious, said Michael Oren, a former Israeli ambassador to the United States.

“My big fear is that the message now gets out that Israel is weak and Israel is vulnerable,” he said. “And that message could be internalized by Hezbollah, by Iran and others.”

“And the (the United States) has this kind of regional war that it didn’t want, and all because it broadcast deep divisions between Israel and the United States.”

Even though any halt to supplies over Rafah could be reversed if fighting blew up in other areas, the ammunition shortages suffered by Ukraine in its war with Russia in recent months underlined the potential problems caused by interruptions to regular supplies of ammunition reaching front line forces.

Hezbollah’s military strength vastly outweighs the forces of Hamas, with thousands of fighters and an arsenal of tens of thousands of missiles capable of hitting Israeli cities.

Israel’s own arms industry is formidable, boasting home grown assets like the Iron Dome missile defence system that has managed to shoot down most of the missiles fired by Hamas. But it is not capable of filling all of Israel’s needs.

“We have remarkable capabilities in Israel, in all fields but there are fields where, even if we were not dependent on the conditions of the American aid money, we would still have to buy weapons from another country,” Avi Dadon, former head of the Defense Ministry’s procurement and production branch, told Israeli radio.

In the longer term, the Biden announcement could prompt Israeli governments to beef up the defence industry even further.

“I don’t see any substitute to the United States of America at the moment,” Amidror said. “It is clear for us that we are going to invest a lot of money to be in a better position to produce for ourselves in the future what we need.”

(Additional reporting by Christophe Van Der Perre, Emily Rose and Maytaal Angel; Editing by Daniel Wallis)