An alleged intelligence leak from Benjamin Netanyahu’s office has ballooned into a major scandal for the Israeli prime minister after a court partly lifted a gag order on the case, saying that the affair may have undermined efforts to reach a hostage deal in the Gaza war.

Four people have been arrested in connection with the joint investigation by the police, internal security services and the army, a court in the city of Rishon LeZion said on Sunday night.

The central suspect was named as Eliezer Feldstein, whom the Israeli media said was hired as a spokesperson and media adviser in the prime minister’s office shortly after the October 2023 Hamas attack on Israel. The other three people to be arrested are members of the security establishment.

A partial gag order is still in place, but the case involves a “breach of national security caused by the unlawful provision of classified information” that “harmed the achievement of Israel’s war aims”, the court said on Friday.

The suspects are alleged to have been involved in leaking Hamas strategy documents found by the Israel Defense Forces (IDF) in Gaza, and manipulating or editing the material to make it seem as though the Palestinian militant group’s leadership planned to drag out the talks as long as possible, as well as smuggle hostages to Egypt.

Reports apparently based on the doctored documents appeared in the British outlet the Jewish Chronicle and the German tabloid Bild in September, leading the IDF to launch an investigation. The Jewish Chronicle later retracted the story and fired the journalist who wrote it.

Netanyahu’s detractors say the articles appeared at a time when he was facing renewed criticism over his handling of the negotiations after six killed hostages were found in a tunnel in Rafah.

The reports also appear to have bolstered Netanyahu’s new demand in the talks after a conditional framework had already been reached – that Israeli troops remain on the Gaza-Egypt border. The demand was rejected by Hamas, and the talks foundered.

Netanyahu has long been accused of stalling on a deal as a way to appease his far-right coalition partners, for whom any concession to Hamas is untenable. He is believed to see staying in office as the best way of avoiding prosecution in longstanding corruption charges, which he denies.

In a statement on Monday, the Hostage Families Forum, which represents most of the friends and relatives of the abductees, said it demanded an investigation “against all those suspected of sabotage and undermining state security”.

It added: “The suspicions suggest that individuals associated with the prime minister acted to carry out one of the greatest frauds in the country’s history. This is a moral low point like no other. It is a severe blow to the remaining trust between the government and its citizens.”

Netanyahu has sought to downplay the affair, calling for the gag order to be lifted and accusing the judiciary of bias. On Saturday he denied any involvement in the leak, or wrongdoing on the part of his staff. The main suspect, Feldstein, “never participated in security discussions, was not exposed to or received classified information, and did not take part in secret visits”, his office said.

Questions have arisen over whether Feldstein was formally employed by the prime minister’s office after reports were published alleging he failed a security clearance polygraph test; he has been photographed next to Netanyahu many times over the past year.

The 32-year-old, from the ultra-Orthodox Tel Aviv suburb of Bnei Brak, previously worked for the far-right national security minister, Itamar Ben-Gvir, and in the IDF’s media unit.

Feldstein was arrested on 27 October and has been remanded in custody until Tuesday, the date of his next hearing. One of the other three suspects is understood to have been released.

The charges of leaking classified information, negligence in handling the material, and using it to influence public opinion, could result in a 15-year prison sentence, the ynet news site reported.