Palestinian chief negotiator Saeb Erekat warned Israel in that continued illegal settlement expansion in the occupied Palestinian territories may mean a two-state solution is no longer an option.

The issue of settlements has become particularly heated since US secretary of state Hillary Clinton praised Israel for making what she called "unprecedented" concessions on the issue, even though Binyamin Netanyahu the prime minister, brushed off US and Palestinian demands for a construction freeze.

Clinton has since been trying to reassure Arab leaders.