PRESS ASSOCIATION -- Turkey is preparing to challenge Israel's blockade on Gaza at the International Court of Justice, turning up the tension between the once close allies.

Foreign minister Ahmet Davutoglu's made the announcement a day after Turkey expelled Israel's ambassador and severed military ties with the country in anger over its refusal to apologise for last year's deadly raid on a Gaza-bound aid flotilla that killed nine pro-Palestinian activists.

In an interview with Turkey's state-run TRT television, Mr Davutoglu dismissed a United Nations report into the raid that said Israel's naval blockade of Gaza was a legal security measure.

He said the report - prepared by former New Zealand prime minister Geoffrey Palmer and former Colombian president Alvaro Uribe, and presented to UN secretary general Ban Ki-moon - was not endorsed by the United Nations and was therefore not binding.

"What is binding is the International Court of Justice," Davutoglu said. "This is what we are saying: let the International Court of Justice decide.

"We are starting the necessary legal procedures this coming week."

Israel's deputy foreign minister Danny Ayalon said his country had nothing to apologise for and it has done all it could to avoid a crisis with Turkey.

He said the Turks apparently intended to raise tensions with Israel for its own reasons.

"The problem here is on the Turkish side. ... They were not ready for a compromise and kept raising the threshold," Mr Ayalon said on Israeli TV yesterday.

"I think we need to say to the Turks: as far as we are concerned, this saga is behind us. Now we need to co-operate. Lack of co-operation harms not only us, but Turkey as well."

Mr Davutoglu said the UN report released on Friday contradicted an earlier report on the Gaza flotilla incident which found that Israeli forces broke international law when they raided the flotilla. That report was prepared in September by three human rights experts appointed by the UN's top human rights body.

He also warned Israel that it risked alienation among Arab nations by resisting an apology.

"If Israel persists with its current position, the Arab Spring will give rise to a strong Israel opposition as well as the debate on the authoritarian regimes," Mr Davutoglu said.

On Friday, Turkey downgraded its diplomatic ties with Israel to the level of second secretary and gave the ambassador and other high-level diplomats until Wednesday to leave the country.

In other measures against Israel, Turkey suspended military agreements, promised to back legal actions against Israel by the raid victims' families, and vowed to take steps to ensure freedom to navigate in the eastern Mediterranean.

Turkish officials refused to elaborate on their government's latest move, but some analysts suggested Turkey could send navy vessels to escort aid ships in the future.

Turkey's main opposition party warned on Friday that such a step could lead to confrontation between Turkish and Israeli forces.

"The probability that (Turkey's ruling) party has carried Turkey to the brink of a hot conflict is saddening and unacceptable," said Faruk Logoglu, a deputy chairman of the opposition Republican People's Party.

Yesterday Mr Ban urged Turkey and Israel to mend ties for the good of the Middle East peace process. "I sincerely hope that Israel and Turkey will improve their relationship," he said during a visit to Australia.

"Both countries are very important countries in the region and their improved relationship - normal relationship - will be very important in addressing all the situations in the Middle East, including the Middle East peace process."

Israeli prime minister Benjamin Netanyahu's spokesman said the UN committee's report concluded that Israel had acted within its rights and said he hoped it would help "put the relationship between Jerusalem and Ankara back on the right track".

"The UN commission clearly states that Israel acted legally in imposing the naval blockade to protect our people from the smuggling of rockets and weapons that are fired at our civilians," government spokesman Mark Regev said.

The UN report called the May 31 2010 Israeli raid "excessive and unreasonable", but also blamed Turkey and flotilla organisers for contributing to the deaths.

Israel insists its forces acted in self-defence and says there will be no apology. Israeli officials pointed out that the report does not demand an apology. Rather, it says "an appropriate statement of regret should be made by Israel in respect of the incident in light of its consequences".

Later Israel's leader said his country does not have to apologise for the deadly raid.

But Prime Minister Benjamin Netanyahu expressed regret for the loss of nine Turkish lives and said he hoped ties with Turkey could be mended.

They were his first public remarks since Turkey expelled the Israeli ambassador on Friday.

Netanyahu told his Cabinet today that Israel does not have to apologise for "acting to defend our civilians, our children and our communities".

He added that Israel "expresses regret at the loss of life."