But Israeli Prime Minister Benjamin Netanyahu -- while he visits Washington this week for the American Israel Public Affairs Committee (AIPAC) three-day annual policy conference -- is now to meet President Barack Obama Tuesday.

The announcement ended speculation Obama might snub Netanyahu over his government's plans for new settler homes in east Jerusalem -- a move that prompted the Palestinians to freeze new peace talks.

A State Department official said US Secretary of State Hillary Clinton had asked her envoy George Mitchell, who was in Jerusalem on Sunday, to pass along the invitation from Obama to Netanyahu.

Clinton will meet Netanyahu at the State Department following her speech to AIPAC on Monday morning, the official told reporters on the condition of anonymity. Netanyahu will speak to the pro-Israel lobby in the evening.

Robert Satloff, the executive director of the Washington Institute for Near East Policy think tank, told AIPAC that the crisis between the two allies is "serious" and "real" even if both sides now are trying to defuse it.

"When it is resolved -- and I think it is in the process of being resolved -- it will leave scars between the two sides, I think at the very highest levels," said Satloff.

Analysts like Satloff warn the settlements row might complicate a US-led drive for tougher UN sanctions against Iran over its uranium enrichment work, which the United States and Israel fear masks a bid to build an atomic bomb.

Israel has threatened preemptive military strikes against Iran.

"I think that the impact of this crisis is to hasten Iranian efforts to achieve a nuclear weapons capability," Satloff warned.

"And ultimately, because there are scars now in the US-Israeli strategic relationship," the impact may be "even to hasten the clock on Israeli preventive action against that Iranian nuclear capability," he said.

Evan Bayh, a Democratic senator who has pushed for tough US sanctions against Iran, warned that Tehran is making a "miscalculation" if it views the "rhetorical spat... as a lack of resolve" by Washington to halt Iran's nuclear drive.

Bayh said "aggressive sanctions" were needed to show US allies that all peaceful options to make Iran change course were exhausted, and because there was a slight chance they could work.

Sounding more pessimistic than optimistic, however, he said "now we have to turn towards perhaps contemplating the final option -- the use of force -- to prevent them from getting a nuclear weapon."

His remarks triggered applause from the thousands of participants.

In the run-up to the policy conference, AIPAC had urged the Obama administration to defuse tension over plans for 1,600 new Jewish settler homes in east Jerusalem.

But in the preceding days, Clinton demanded and received a response from Netanyahu about US concerns over the impact of the settlements.

Sunday, Netanyahu vowed there would be no halt to settlement building in east Jerusalem but, in an apparent concession to the US, said Israel was willing to widen the scope of planned indirect talks with the Palestinians.

His comments on settlements were quickly denounced by Palestinian president Mahmud Abbas as unhelpful to attempts to restart talks. Abbas also condemned the recent killing of four Palestinians in the West Bank by Israeli forces.

Small groups of protesters, both non-Jews and Jews, stood outside the convention center protesting Israeli policies in the Palestinian territories.

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