Israel’s ambassador to Washington has privately conceded that his country’s relationship with the US is in a “crisis” comparable with those of three decades ago, it emerged on Monday.

During a weekend briefing with Israeli diplomats in the US, Michael Oren, the ambassador, reached back many years to find parallels for the present dispute over the decision to build another 1,600 homes inside a Jewish settlement in East Jerusalem.

According to officials, he said this “crisis” was comparable to the row with the US over Israel’s invasion of Lebanon in 1982 and to disagreements sparked by tensions with the Arab states in the 1970s. The Israeli embassy in Washington said it did not discuss internal briefings publicly.

Senior US officials, including Hillary Clinton, secretary of state, have condemned Israel for its “insulting” decision to expand the settlement of Ramat Shlomo in occupied East Jerusalem when Joe Biden, the vice-president, was visiting the country to restart peace talks with the Palestinian leadership.

In an angry 45-minute telephone conversation with Benjamin Netanyahu, the Israeli prime minister, Mrs Clinton urged Israel to abandon the plan. “I think it’s pretty obvious that we have asked that,” said a state department official. “We need to do something that is significant that shows they [the Israelis] are committed to this process and Middle East peace. It’s not about the words, we are looking for actions.”

While expressing regret at the timing of the move, Mr Netanyahu stressed on Monday that Israel would continue to build homes for Jews in Arab East Jerusalem, which the Palestinians claim as the capital of a future independent state.

“The building in Jerusalem and in all other places will continue in the same way that has been customary over the last 42 years,” he told his Likud party.

Israeli officials stressed that it was “business as usual”. A spokesman for Mr Netanyahu declined to comment on Mrs Clinton’s call for Israel to cancel the Ramat Shlomo plans.

The rift has raised tensions within the US as well. The American Israel Public Affairs Committee called on Barack Obama’s administration “to take immediate steps to defuse the tension with the Jewish State”.

It added: “The administration should make a conscious effort to move away from public demands and unilateral deadlines directed at Israel, with whom the US shares basic, fundamental and strategic interests.”

But J-Street, a rival organisation, praised the US stance as “both understandable and appropriate”.

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