Benjamin Netanyahu this week appeared deaf to allies’ concerns about settlements, as Yair Lapid said plans for 1,000 extra housing units in Arab areas of Jerusalem could damage Israel’s relations with the US.

The government initiative from Uri Ariel, the ultra right-wing religious nationalist Housing Minister, will see homes built for Jews in East Jerusalem and the West Bank as part of a series of announcements.

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The East Jerusalem settlement of Ramat Shlomo, where the Israeli government has just announced another 600 homes will be built

Prime Minister Netanyahu seemed to dismiss warning from the United States, which said the settlement homes in Har Homa and Ramat Shlomo would “poison the atmosphere” and put distance between Israel and its allies.

Cracks in the relationship are now clearly showing, after the White House refused the Israeli defence minister’s requests to meet several top national security aides.

There was also criticism from within Netanyahu’s ruling coalition, with Finance Minister Yair Lapid, who said: “This plan will lead to a serious crisis in Israel-US relations and will harm Israel’s standing in the world.”

Plans to extend Har Homa and Ramat Shlomo (pictured), two existing Jewish settlements, are the latest incendiary moves that have led several countries to condemn Israel for its building on what Palestinians see as their future capital.

UN Secretary-General Ban Ki-moon was among the latest to lay into Netanyahu on settlements, saying they were “a clear violation of international law” and “did not send the right signal”.

It is understood that pressure to continue settlement-building was coming from Netanyahu’s coalition ally Jewish Home, the country’s third biggest party, led by former settler leader and ultra right-wing nationalist Naftali Bennett.

His party, which controls the Housing Ministry, has threatened to destabilise the government unless construction work is rolled out.