In December, Israeli lawyers had planned to petition the Supreme Court to intervene over the awarding of a defence contract to Germany's ThyssenKrupp, amid allegations of a conflict of interest involving Netanyahu's own lawyer.

The deal, involving the purchase of Dolphin-class submarines, has come under scrutiny since it emerged that the lawyer, David Shimron, who is also his cousin, also represents the local agent of ThyssenKrupp.

Both Netanyahu and Shimron have denied any impropriety. ThyssenKrupp Marine Systems said it has no contractual connection with the lawyer.

"The decision to move ... to a criminal probe in the 'ships affair' was taken following information gathered by police in the past few months and the evidence that has raised reasonable suspicions against some of those involved," the justice ministry statement said.

"There should be no doubt that according to the current findings, the prime minister is not among the suspects in the affair," the statement added.

After news of the investigation broke, Shimron said he welcomed the inquiry and that its findings would clear him and that he would cooperate with investigators.

"I am absolutely certain ... that objective, expert officials will find, once and for all, that my actions were faultless and that I acted according to the law and in line with conflict-of-interest arrangements," Shimron said.

Police have been questioning Netanyahu for several weeks over separate corruption allegations the prime minister has dismissed as “baseless".

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