Qatar said on Tuesday it had allocated $480 million in aid to the cash-strapped Palestinian Authority to support education and health services and provide urgent humanitarian relief.

The authority led by president Mahmud Abbas has been hit by the cutting of two of its leading sources of revenues.

Washington has ended all bilateral US aid in response to the Palestinians' severing of contacts after it recognised the disputed city of Jerusalem as Israel's capital in 2017. A row with Israel has meanwhile led to a halt to transfers of customs duties it levies on goods destined for Palestinian markets.

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Both Abbas and the leader of Hamas, the rival Palestinian faction which controls the Gaza Strip, welcomed the Qatari announcement.

“The state of Qatar has allocated $300m in the form of grants and loans to support the health and education sectors' budgets with the Palestinian Authority,” the official Qatar News Agency said.

It said Doha had also allocated another $180m in “urgent relief and humanitarian aid and in support of UN programmes in Palestine”. Aid will also go to the power sector to ensure supplies are not interrupted.

In a statement on official Palestinian news agency Wafa, Abbas thanked the emirate for its financial assistance, which he said would “contribute to alleviating and supporting the burdens of our people.”

Hamas leader Ismail Haniya said the aid was “a continuation of the unwavering Qatari stances that support the Palestinian people”.

In February, Israel decided to deduct around $10m a month from the customs duty it collects on behalf of the Palestinians, corresponding to the amount it said they paid families of prisoners or directly to inmates serving time in Israeli jails.

The Palestinians responded by saying they would refuse any funds where unilateral deductions had been made. Israel sees the payments to those who have carried out attacks against Israelis as encouraging further violence.

The Palestinian Authority describes the payments as a form of welfare, while the Palestinian public regards prisoners jailed by Israel as national heroes.

Gas-rich Qatar is a major aid donor to the Palestinians, both to Abbas's West Bank-based Palestinian Authority and to the rival Gaza administration of Hamas.

In November, the Gulf state, which is a longtime Hamas ally, committed to providing around $15 million a month in aid to Gaza over six months.