Addressing leaders at an emergency Arab summit in Doha, the Qatari capital, al-Assad declared that the Arab initiative for peace with Israel was now "dead".
He said Arab countries should cut "all direct and indirect" ties with Israel in protest against its offensive in Gaza.
Egypt and Jordan are the only Arab countries to have signed peace treaties with Israel and have Israeli embassies.
Summit demands
The Qatari-hosted Arab summit concluded on Friday with participants agreeing to present a Kuwaiti-hosted summit - to be held on Sunday - with a list of measures to end the conflict in Gaza.
Those measures include demanding that Israel stops its offensive in the Strip, is held responsible for "crimes" committed in Gaza and immediately re-opens all crossings.
The summit also agreed that all Arab countries should form a "sea-bridge" that would enable aid supplies to reach Gaza.
Speaking from Ankara, Recep Tayyip Erdogan, the Turkish prime minister, said Israel should be barred from the United Nations while it continues to ignore UN demands to end the fighting in Gaza.
"How is such a country, which totally ignores and does not implement resolutions of the UN Security Council, allowed to enter through the gates of the UN?" he said.
Erdogan's comments came hours ahead of Friday's official visit to Turkey by Ban Ki-moon, the UN secretary-general.
The Turkish leader also added his voice to widespread condemnation of Israel's bombing of a UN compound in Gaza on Thursday.
"The UN building in Gaza was hit while the UN secretary-general was in Israel ... this is an open challenge to the world, teasing the world," he said.
Diplomatic efforts to broker a ceasefire have intensified over recent days with emergency meetings being held in Qatar, Turkey, Kuwait and Egypt.
Arab divisions
However, Friday's emergency summit in Doha has highlighted divisions within the Arab world, with Egypt and Saudi Arabia declining to attend, preferring instead to send delegates to a separate meeting of foreign ministers in Kuwait.
The Palestinian political factions Hamas, Islamic Jihad and the Popular Front for the Liberation of Palestine (PFLP) did attend the Doha summit.
Hashem Ahelbarra, Al Jazeera's correspondent in Doha, said the delegates recognised the legitimacy of the Gazan factions, whereas Egypt, Saudi Arabia and Western nations have sidelined them from ceasefire talks.
"You have two camps: The so-called moderate Arab countries, Saudi Arabia, Egypt, Jordan, some Gulf monarchies like the UAE, and those who are trying to say that we totally disagree with the US attempt to implement a new Middle East."
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The following demands will be taken to Sunday's Kuwait summit for pan-Arab approval:
- Strong condemnation of Israel
- Israel withdraws from Gaza
- Legal liability for Gaza "crimes"
- Re-opening of crossings
- "Sea-bridge" to supply Gaza
- Assist Palestinian reconciliation
- Establish Gaza rebuilding fund
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Ahelbarra said the "moderate camp" is uncomfortable with Hamas's ties with Iran and suspects that the Iranian leadership is using some Arab countries to further its influence in the region.
He said that the latter group believes it has the duty to convey the anti-war feeling of the Arab street and condemn Israel's actions.
Talks are continuing in Cairo over an Egypt-sponsored truce, with Amos Gilad, the Israeli chief negotiator, telling Egyptian officials Israel wants an open-ended ceasefire.
Israel is demanding that rocket fire from Gaza ceases and that an international force is established to prevent weapons being smuggled into Gaza.
Hamas want Israeli troops to be withdrawn from the Gaza Strip immediately and for all border crossings into the territory to be permanently re-opened.
While Israel says it reserves the right to use military action if under threat, its emergency security cabinet is expected to vote on Saturday in favour of a unilateral ceasefire in Gaza, according to news agency AFP.
By Friday morning, 1,155 Palestinians have been killed and more than 5,200 injured since Israel launched its offensive on December 27. One third of the dead are children.