The Ireland Strategic Investment Fund (ISIF), which invests at home to support economic growth but also holds a portfolio of liquid international assets, has come under pressure from the main opposition party, Sinn Fein, to divest the assets.

Long a champion of Palestinian rights, Ireland last month joined Spain, Malta and Slovenia in taking the first steps toward recognising Palestinian statehood in the West Bank and the Gaza Strip.

It will sell shareholdings totalling 2.95 million euros ($3.20 million) in Bank Hapoalim BM, Bank Leumi-le Israel BM, Israel Discount Bank, Mizrahi Tefahot Bank Ltd, First International Bank and Rami Levi CN Stores, one of Israel's leading supermarket chains.

"I have been advised by the National Treasury Management Agency (NTMA) that it has decided to divest from certain ISIF global portfolio investments in companies that have certain activities in the Occupied Palestinian Territory," McGrath said in a statement.

The decision will be implemented as soon as possible over the coming weeks, he added.

The world's largest sovereign wealth fund, Norway's $1.6 trillion fund, has over the years divested from nine Israeli companies over activities in the occupied Palestinian territories.

Israel captured the West Bank, Gaza and East Jerusalem - areas of historic Palestine that the Palestinians want for a state - in 1967, and has since built extensive Jewish settlements in the West Bank.

The U.N. refers to the territories as occupied, something Israel disputes, and demands that Israeli forces withdraw.

($1 = 0.9225 euros)

(Reporting by Padraic Halpin; Editing by Kevin Liffey)