Israel's announcement of a settlement plan has put its ties with the United States on grill, to which the Palestinians are fanning up the fire whereas the Americans are striving to scoop out some burning charcoal.

The ill-timed pronouncement coincided with U.S. Vice President Joe Biden's visit to the Jewish state to push for commencement of indirect talks between the Israelis and Palestinians.

The Israeli announcement to build 1,600 homes in a part of the West Bank it had annexed to Jerusalem angered Palestinians and triggered off the feud with Washington.

U.S. Secretary of State Hillary Rodham Clinton described the Israeli move as an "insult" and a "deeply negative signal" for bilateral ties.

Israeli ambassador in Washington Michael B. Oren resorted to the word "crisis" to define the strain caused by his country's settlement announcement.

What Israel did has reflected a growing mistrust toward the Obama administration as recent surveys have polled many Israelis with a feeling that incumbent U.S. President Barack Obama is not as friendly toward Israel as his predecessor George W. Bush was.

"Others in his (Israeli Prime Minister Benjamin Netanyahu) coalition apparently thought it unproblematic to insult Biden," said Michele Dunne, a Middle East expert with the Carnegie Endowment for International Peace.

"And why should they? President Obama failed to visit and use his much-vaunted powers of persuasion directly on Israelis last spring when he visited Egypt and Turkey," the expert added.

Obama's foreign policy, with a focus on reversing the U.S. image in the Muslim world, apparently led the Israelis to feel being ignored.

The anger felt by the secretary of state and other Americans was justifiable as they cherished almost a year's painstaking mediation which was finally convincing the Palestinians to come back to the negotiating table.

Now the talks risk a total breakdown before they even get started.

Palestinian President Mahmoud Abbas has said that he will not attend the talks given the current circumstances and if Israel presses ahead with more settlement plans, the hope for re-opening the peace talks will be dead.

As a result, Obama's efforts in the Middle East would have to return to point zero, which is unacceptable to him and his administration which sees the success of the Middle East peace process vital to the national security interests of the United States.

Clinton has therefore made three demands over a recent tense phone conversation with Netanyahu, pressing him to reverse the settlement announcement, according to reports by the Washington Post.

"We have to have guarantees that these kinds of things will not happen again," Clinton was quoted as saying.

But the secretary of state has assured reporters that she was not feeling that U.S.-Israeli relations had hit a 35-year low.

Though a U.S. mediator deferred his visit to usher in indirect talks, Clinton was already seeing progress within the past few days and said that the Obama administration was talking to the Israelis on how they might demonstrate their commitment.

During an interview with Fox News earlier this week, Obama reaffirmed U.S. commitment to Israel by saying: "Israel's one of our closest allies and we and the Israeli people have a special bond that's not going to go away."