The Middle East peace process has reached a 35-year low and is now a "crisis of historic proportions," according to Israel's ambassador to the U.S.
Michael Oren told Israeli media that the decision to build 1,600 more homes for Jews in East Jerusalem -- which the Palestinians want as a future capital -- and then announce it right before a visit by Vice President Biden was a serious blow to the negotiations.
"Israel's ties with the United States are in their worst crisis since 1975," he said over the weekend, apparently referring to tensions over the Egyptian Sinai, which was occupied by Israel since the 1967 war and the site of renewed fighting in 1973.
Secretary of State Hillary Clinton called Israel's behavior "insulting" but told CNN that ties between the United States and Israel were "not at risk," saying, "Our relationship is durable and strong."
Popular VideoThis young teenage singer was shocked when Keith Urban invited her on stage at his concert. A few moments later, he made her wildest dreams come true.
Israeli Prime Minister Benjamin Netanyahu called the timing of the announcement of the settlements a bureaucratic mistake. "We know how to deal with these situations - with equanimity, responsibly and seriously," he said.
Palestinian officials said indirect peace talks, which they agreed last week to hold with Israel under U.S. mediation, would not take place unless the settlement project was canceled. Netanyahu said he would not cancel the settlements.
George Mitchell President Obama's envoy to the Middle East, is scheduled to visit Israel this week.