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©AFP / Saul Loeb

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WASHINGTON (AFP) - President Barack Obama denied a crisis was rocking US-Israeli relations, as one of the worst rows in years between the allies rumbled on over new homes for Jewish settlers.

Obama's first public comments on the showdown came as his administration awaited a response from Israeli Prime Minister Benjamin Netanyahu about Washington's sharp complaints over the episode.

The president was asked in an interview with Fox News if there was a "crisis" in US-Israeli relations after the announcement on 1,600 new settler homes in annexed east Jerusalem embarrassed Vice President Joe Biden during a visit to the Jewish state.

"No," Obama answered. "We and the Israeli people have a special bond that's not going to go away.

"But friends are going to disagree sometimes... there is a disagreement in terms of how we can move this peace process forward."

Obama noted that the announcement on the new settler homes last week was the work of the Interior Ministry in Israel and that Netanyahu had apologized.

And he called on both Israelis and Palestinians to "take steps to make sure that we can rebuild trust."

Tensions eased in Jerusalem as Israel reopened the flashpoint Al-Aqsa mosque compound one day after the Holy City saw the heaviest Palestinian rioting in years with dozens of police and protesters injured.

Israeli police, however, remained on high alert in and around the Old City where the mosque compound, the holiest site for Jews and the third holiest for Muslims, is located.

The New York Times meanwhile reported that the White House was considering proposing a US plan to form the basis of Israeli-Palestinian negotiations as US officials questioned the commitment of Netanyahu's government to peace talks.

Should Obama present his own proposal, complete with territorial maps, it would likely not take place until his special envoy to the Middle East, George Mitchell, had engaged in several months of US-brokered indirect "proximity" talks between the two sides, the Times said.

Secretary of State Hillary Clinton meanwhile headed to Moscow, for a meeting of the international Quartet on Middle East peace talks, without holding an expected telephone call with Netanyahu.

"We're still looking forward to a response. It hasn't happened yet. There hasn't been a call yet," Mark Toner, a State Department spokesman, told reporters after Clinton's departure.

©AFP / Abbas Momani

Tensions eased in Jerusalem as Israel reopened the flashpoint Al-Aqsa mosque compound

With nightfall in Jerusalem and Clinton flying to Moscow on her US Air Force plane, which has good phone connections, there was no sign the call would happen Wednesday despite officials' earlier insistence otherwise.

Related article:Mideast Quartete meet will show support for talks:US

Netanyahu did speak overnight, however, with Vice President Biden, the prime minister's office in Jerusalem said.

A White House aide would only say that the call was part of "ongoing negotiations."

In a previous call last week, Clinton told Netanyahu that Israel's treatment of Biden sent a "deeply negative signal," just as Washington had persuaded Palestinians to join indirect "proximity" peace talks.

She said Tuesday Washington was engaged in "very active consultation" with the Israelis over steps that would demonstrate the requisite commitment getting peace talks on again.

Earlier, the Israeli government showed no sign of backing down on the wider issue of Jewish settlements, even if it welcomed US assurances that its bond with the United States was safe following the row.

©AFP / Gali Tibbon

Lieberman said demands for a halt to building settler homes "unreasonable"

Foreign Minister Avigdor Lieberman said demands for a halt to building homes for Jewish settlers in mostly-Arab east Jerusalem were "unreasonable."

The row erupted when Washington, frustrated by the lack of success for its peace brokering, reacted angrily last week to an Israeli announcement that the new homes for Jewish settlers would be built in east Jerusalem, the mainly Arab half of the Holy City that was annexed after being captured in 1967.

Related article:Abbas asks EU to press Israel on settlements

Mitchell decided to cancel a planned trip to meet Israeli and Palestinian officials until after Clinton joins her Quartet partners Russia, the United Nations and the European Union in Moscow on Thursday.

The US envoy had been scheduled to visit the Middle East at the beginning of the week.

The State Department said Mitchell first delayed his visit to give Netanyahu time to respond to the US concerns on settlements, but then said logistics were the reason the envoy canceled plans to visit the Middle East this week.

It gave no date for when the talks will occur.

Netanyahu is due to visit the United States next week to speak at a meeting of AIPAC, the pro-Israel lobby.