JERUSALEM?(UPDATE) US Secretary of State Hillary Clinton on Saturday failed to convince Palestinians and Israelis to revive stalled peace talks, with the issue of Jewish settlements remaining a main stumbling block.

Washington's top diplomat was holding talks with Israel's foreign and defence ministers and was to meet with hawkish Prime Minister Benjamin Netanyahu later in the night.

Clinton's visit comes after repeated rounds of shuttle diplomacy by US Middle East envoy George Mitchell in recent months yielded little progress in the US push to get Israelis and Palestinians back to the negotiating table.

Earlier on Saturday Clinton held "difficult" talks with Palestinian president Mahmud Abbas in Abu Dhabi, but failed to convince him to resume negotiations with Israel without a complete Israeli freeze on settlement activity, officials said.

The Palestinian leader insisted once again on the halt before the resumption of peace talks that were suspended during the Gaza war at the turn of the year.

"Israel should honor its obligations especially with regards to the total halt on the settlements," Abbas told reporters after the meeting in Abu Dhabi, adding that no breakthrough had been reached.

Palestinian chief negotiator Saeb Erakat said Abbas's meeting with Clinton was "frank and difficult" and warned that the gap between Israel and the Palestinians was "widening even more."

Israel has up to now refused a complete halt to settlement activity, but a senior US official travelling with Clinton admitted a "difficult period" in peace efforts, but insisted that "neither side has shut the door."

Defense Minister Ehud Barak said hours before Clinton's arrival that peace negotiations should be launched "in the coming weeks."

"It is essential that both sides make an effort to start the negotiations. This is a unique opportunity. A deadlock would only serve Hamas and the radical elements in the region," Barak's office quoted him as saying.

Washington has for months been struggling to revive peace talks as part of a push toward a regional deal that would also see Israel strike peace with Syria and Lebanon and Arab states normalize relations with the Jewish state.

But the efforts have so far made little visible progress, with the issue of Israeli settlements on Palestinian land, considered illegal by the international community, the main stumbling block to resuming talks.

US President Barack Obama's administration had insisted on a complete settlement freeze after Netanyahu assumed office seven months ago, including in annexed east Jerusalem.
After Israel repeatedly balked, Washington eased up, saying that the most important thing was for the talks to resume.

But the Palestinians are insisting on a complete halt, including in mostly Arab east Jerusalem, which Israel captured from Jordan along with the rest of the West Bank in the 1967 Six Day War and later annexed in a move not recognized by the international community.

"The question (of Jerusalem) was at the centre of discussions with Mrs Clinton," said Abbas spokesman Nabil Abu Rudeina, adding that "peace starts in Jerusalem" and blaming Israeli "intransigence" for the diplomatic impasse.

"Without Jerusalem, there will be no point in peace," he warned, saying that "the American administration, in addition to being a mediator, has to press Israel (to respect) its commitments" including in Jerusalem "whose annexation is not recognised by the United Nations or the international community."

Israel sees Jerusalem as its "eternal, indivisible" capital, but Palestinians want to make it the capital of their promised state.