Boycotters have begun alleging that rough diamonds polished in Israel are "blood diamonds."

In a letter to Retail Jeweller magazine, Palestine Solidarity Campaign's Sean Clinton wrote: "Diamonds from Israel funding war crimes and crimes against humanity has received far less exposure than Zimbabwe. But according to Israeli economist Shir Hever, revenue from such diamonds provides about £622m in annual funding for the Israeli military."

Mr Hever gave evidence to the Russell Tribunal on Palestine, where he said: "Every time somebody buys a diamond that was exported from Israel, some of that money ends up in the Israeli military, so the financial connection is quite clear."

Irish Palestinian Solidarity campaigners have also targeted the Facebook page of Blue Nile, the world's largest online diamond retailer, for calling their diamonds "conflict free" because many of their rough diamonds are finished in Israel.

But Noah Shani, commercial attaché at the Israeli Embassy in London, said it was ridiculous to suggest the sale of diamonds was funding the military. "We have no diamond mines in Israel, all we do is buy and polish and trade. How can they be conflict diamonds? It's just rubbish."

Finished diamonds are among Israel's biggest exports. All Israeli diamonds are certified by the Kimberley Process, guaranteeing that they are not "blood diamonds", defined as financing rebel movements or their allies aimed at undermining legitimate government.

A petition was launched this month by Global Palestinian Solidarity to urge the Kimberley Process to review the term "conflict free" when applied to diamonds finished in Israel. It has attracted around 800 signatures. It said: "The KP definition of a conflict or blood diamond must be urgently reviewed to include all diamonds that fund human rights violations."

But diamond merchants in London's Hatton Garden were bewildered by the claims. Jonny Deal, owner of the Heart of Hatton Garden Emporium, said: "We've never heard of anyone having a problem with Israeli diamonds."