JERUSALEM, AP – Benjamin Netanyahu assumed the mantle of leadership of opposition to Israel”s pullout from Gaza by resigning as finance minister just as the Cabinet was about to begin voting on it.

A hard-liner and former prime minister with ambitions to reclaim the top job, Netanyahu said he resigned Sunday because he fears the pullout, set to begin next week, will turn Gaza into a &#34base of Islamic terror&#34 and endanger Israel.

&#34I cannot stop this, but I can be at peace with myself. I can say that I cannot be a party to this,&#34 Netanyahu told reporters at a news conference after he resigned.

In an immediate response, Israel”s stock market dropped five percent within an hour. Netanyahu had adopted a pro-business economic policy and cut welfare benefits in more than two years as finance minister.

Prime Minister Ariel Sharon, trying to limit damage to the economy, announced he would stick to that approach. He picked his confidant, Vice Premier Ehud Olmert, as interim finance minister in a show of continuity.

The resignation could force early elections. For now, the vote is set for November 2006.

Netanyahu enjoys strong support in the ruling Likud Party, which largely opposes the pullout. He could try to wrest Likud leadership from Sharon in coming months as a step toward running for prime minister again.

Netanyahu, 55, dropped his political bomb as the Cabinet debated the first stage of the withdrawal, the removal of three isolated Gaza settlements — Kfar Darom, Morag and Netzarim. He put a note with his negative vote and a resignation letter in front of Sharon and left.

&#34It was very dramatic in there,&#34 said Cabinet minister Matan Vilnai of Labor. Vilnai said Sharon did not react.

Shortly after Netanyahu”s exit, the ministers voted 17-5 to approve the dismantling of the three settlements. In all, about 9,000 settlers will be removed from their homes in 25 settlements — 21 in Gaza and four in the northern West Bank.

The vote was largely a formality because the government has repeatedly approved the overall withdrawal in principle. It was the first of the final four votes needed to allow the government to begin the actual withdrawal. The three additional votes are expected in the coming days.

Netanyahu told the news conference he was conflicted because he had hoped to continue what he described as &#34historic&#34 economic reforms, but could not lend his support to the pullout plan.

Netanyahu has a well-known flair for the dramatic. Speaking native American English, he became Israel”s main foreign policy spokesman in the 1990s and has a large following in the United States. During the 1991 Gulf War, he once did a live TV interview wearing a gas mask against a possible Iraqi chemical attack.

He became prime minister in 1999. Though he was voted out of office just three years later, he remains a favorite of hard-line Israelis, especially those who feel betrayed by Sharon”s about face after decades of pushing settlement expansion.

Jewish settler leaders had long hoped the charismatic Netanyahu would quit the government and lead their struggle against the Gaza pullout. They praised Netanyahu”s decision. But Eran Sternberg, spokesman for the Gaza settlers, said it came &#34far too late.&#34

Sharon aide Raanan Gissin said that while the resignation produced some political turmoil, it would not affect the timetable of the pullout.

After the stock market nosedive, Sharon tried reassure jittery investors. He told Bank of Israel Governor Stanley Fischer the upcoming state budget will meet deficit and expenditure targets that were set by the government, Sharon”s office said in a statement.

In other developments Sunday:

• Eden Natan-Zada, a Jewish extremist who killed four Israeli Arabs in a shooting rampage on a bus last week, was buried in his hometown in a civilian ceremony after the military refused to inter him. Natan-Zada, 19, who deserted his army unit several weeks ago, was beaten to death by an angry mob.

• Israel”s defense minister ordered the arrest without charges of three suspected Jewish extremists, a precautionary measure to prevent further attacks. A Defense Ministry statement identified one as Saadia Hirschkop, 18, a U.S. citizen living in Kfar Habad near Tel Aviv.