JERUSALEM, Israel - Israeli officials are calling the bourgeoning agreement between the U.S.-backed Palestinian Authority and the terrorist group Hamas to form a national unity government a "fatal mistake."
"The agreement between Fatah and the terrorist organization of Hamas is a fatal mistake which will prevent the establishment of a Palestinian state, and destroy the chances of achieving peace and stability in the region," Israeli President Shimon Peres said.
It's not the first time both sides are calling the deal "historic."
Israeli Prime Minister Benjamin Netanyahu says the Palestinian Authority will have to choose between peace with Israel and peace with Hamas.
"Peace with both is impossible because Hamas aspires to destroy the State of Israel and says so openly. It fires missiles at our cities; it first anti-tank rockets at our children," Netanyahu said in a statement released by his office.
The prime minister's spokesman, Mark Regev, said it's important to understand who Hamas is.
"Hamas is one of the most extreme Islamist terrorist organizations," Regev told CBN News. "They say no to peace. They say no to reconciliation. They say yes to terrorism and violence. They believe Israel should be obliterated. They say every Israeli civilian man, woman and child is a legitimate target," he said.
Hamas announced the new caretaker government would not recognize Israel or enter negotiations.
Egypt said the unity deal intends to help Palestinians seeking unilateral recognition of an independent Palestinian state at the United Nations in September, something many in the U.S. Congress oppose.
"That's not the way a decision should be arrived at of two states. I think we're very united on that reaction," Rep. Kay Granger (R-Tx.) told CBN News during an official visit to Jerusalem.
Because Hamas is a terrorist organization, this latest development could cause a dilemma for the United States, a U.S. official told CBN News.
In 2010, the U.S. gave the Palestinian Authority nearly $600 million, but it is prevented by law from negotiating with Hamas. It's not clear what the Obama administration will do now that the groups have joined forces.
House Foreign Affairs chairwoman Rep. Ileana Ros-Lehtinen (R-Fl.) said the new hybrid government cannot receive U.S. taxpayer funds because the law says that "The P.A. government must recognize the Jewish State of Israel's right to exist, among other things," she said.
Hamas is a branch of Egypt's radical Muslim Brotherhood and backed by Iran. The Iranian Foreign Minister Ali Akbar Salehi welcomed the deal and said he hoped it would "bring victory over the Zionist occupation."
"Hamas, as we know, is conducting a military buildup in Gaza and the Iranians, the Iranian government is helping them to do so," Regev said.
"Just a few weeks ago, we intercepted a ship loaded with Iranian munitions, with missiles, with rockets, with weapons - other weapons - headed for Gaza," he said.
Palestinian Affairs expert Pinchas Inbari, of the Jerusalem Center for Public Affairs, told CBN News that Iran is Hamas' "main supporter."
"Iran is the main supporter of Hamas in Gaza and, as far as we know, Ahmed Jabari, the commander of the military wing of Hamas, is directly connected with Tehran - even bypassing Damascus - so many of Hamas' military activities are ordered from Tehran," Inbari said.
Some are predicting this new unity will lead to a Hamas takeover in the West Bank - biblical Judea and Samaria - which would bring the well-armed, Iranian-backed group dangerously close to Israel's major cities.