US Secretary of State Hillary Clinton is to call on Israel to make "difficult but necessary choices" if it wants a peace agreement with the Palestinians.

Mrs Clinton will warn that the status quo is "unsustainable" in a speech to the pro-Israel lobby group, Aipac.

Her comments come amid a dispute between the US and Israel over plans for 1,600 new homes in East Jerusalem.

On Sunday, Israeli Prime Minister Benjamin Netanyahu ruled out halting settlement construction in the city.

The Palestinian Authority is furious at Israel's insistence on building on occupied territory. It sees it as a serious stumbling block to the resumption of talks, which have been stalled for more than a year.

Nearly 500,000 Jews live in more than 100 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem. They are held to be illegal under international law, which Israel disputes.

'Trust-building measures'

In her speech to a convention in Washington of the influential Aipac (American Israel Public Affairs Committee), Mrs Clinton will underscore the Obama administration's "rock solid" commitment to Israel.

The status quo is unsustainable for all sides. It promises only violence and unrealised aspirations

Hillary Clinton
US Secretary of State

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"Guaranteeing Israel's security is more than a policy position for me. It is a personal commitment that will never waver," she will say, according to excerpts released by the state department.

But, she will add, it is Washington's "responsibility to give credit when it is due and to tell the truth when it is needed".

Mrs Clinton has demanded Mr Netanyahu move to restore confidence in the peace process, including extending the suspension of new building in the West Bank to include East Jerusalem.

In a telephone call on Friday, he proposed a series of "trust-building measures" that represented "a real effort" to aid US peace efforts.

Although details have not yet been made public, Israeli officials say these include an agreement to discuss all outstanding issues in the indirect "proximity talks" being mediated by US special envoy George Mitchell.

However Israel will not discuss a freeze on settlement construction in Jerusalem.

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"As far as we are concerned, building in Jerusalem is like building in Tel Aviv," Mr Netanyahu told his cabinet on Sunday.

But Mrs Clinton will warn in her speech that the "status quo is unsustainable for all sides" and "promises only violence and unrealised aspirations".

"There is another path - a path that leads toward security and prosperity for all the people of the region. It will require all parties including Israel to make difficult but necessary choices," she will say.

Mrs Clinton will also speak on the need for sanctions on Iran over their nuclear programme.

She will call for "sanctions that will bite" on Tehran.

Iran says its nuclear programme is for peaceful, civilian use, but the US disagrees.

"Let me be very clear: The United States is determined to prevent Iran from acquiring nuclear weapons," the secretary of state will say.

If Iran developed a nuclear weapon, it would embolden terrorists and spark an arms race that would destabilize the Middle East, according to the Secretary of State.

"This is unacceptable to the United States, unacceptable to Israel and unacceptable to the region and the international community," she will say.

The US and its allies have been pressing for sanctions on Iran, but China and Russia have so far resisted them.

On Sunday, Israeli soldiers shot dead two Palestinians in the West Bank. The circumstances were unclear, but one report said the soldiers opened fire when the Palestinians tried to stab them.

Two Palestinian youths were killed by Israeli troops on Saturday following violent clashes with Jewish settlers.

Mr Netanyahu is due to meet President Barack Obama in Washington on Tuesday during a visit when he will also address Aipac members.