TEL AVIV, Israel – An investment group led by Abu Dhabi’s government-owned ADQ fund called off a proposed deal to buy control of Phoenix Holdings, Israel’s biggest insurer, citing regulatory issues.

In a report to the Tel Aviv Stock Exchange early Sunday, Phoenix said the draft agreement it filed with the ADQ consortium in December was terminated. The deal was one of the largest between companies in the United Arab Emirates and Israel since the two countries normalized relations almost three years ago under the U.S.-backed Abraham Accords.

“The parties have come to a mutual understanding regarding termination of the term sheet… in light of the potential regulatory limitations that would have arisen from the acquisition of the controlling stake by the consortium resulting in potential restrictions for several members of the consortium to undertake additional material investments in Israel,” the Phoenix statement said.

ADQ, the third-largest Abu Dhabi sovereign wealth fund with close to $160 billion in assets under management, offered as much as $675 million for a stake of 25-30% in Phoenix in negotiations with the Israeli company’s controlling U.S. shareholders, Centerbridge Partners and Gallatin Point Capital.

The UAE and Israel signed a free-trade agreement last year that the two countries predict will generate $10 billion in annual bilateral economic activity by 2026. Mubadala, another Abu Dhabi sovereign wealth fund, bought a 22% stake in an offshore Israeli natural gas field two years ago for $1.1 billion.

Abu Dhabi’s G42, a government-owned defense and technology company, launched joint firm last month with Viola Ventures, Israel’s largest private investor in tech firms, aiming to provide computer engineers and other skilled employees to businesses around the world.

While the Abraham Accords, which also included Bahrain, Morocco and Sudan, generated excitement for a new era of Middle East trade – bringing some half a million Israelis to visit the UAE for tourism and exploration of business opportunities – some of the enthusiasm has cooled.

UAE officials have said they are committed for the long term to normalization with Israel, even as the government has publicly criticized Israel’s handling of clashes with the Palestinians. Most recently, the UAE condemned the entry of Israeli forces into Jenin last month, the biggest West Bank military operation in 20 years, in which 12 Palestinians and an Israeli were killed.