The accelerating pace of Jewish settlement expansion in East Jerusalem this year may spur violence between Israelis and Palestinians in the city and cripple new efforts by the Obama administration to kick-start peace talks, an Israeli anti-settlement group warned yesterday.

The “massive” construction being planned by Jewish settlers within Palestinian neighbourhoods in East Jerusalem is likely to prompt clashes, said Yudith Oppenheimer, the executive director of Ir Amim, a Jerusalem-based advocacy group.

“There is a combination of factors, including settlers invading Palestinian neighbourhoods, already annoying with their presence and control of houses and land and their mass construction plans when, next door, Palestinian neighbours cannot even build a balcony because they do not get a permit. This creates the conditions for violence,” she said.

On Sunday, Ir Amim claimed that the Israeli government and the Jerusalem municipality had, during the first six months of 2009, helped pro-settler private groups advance plans to construct about 150 housing units in Palestinian neighbourhoods in Jerusalem. The units would be able to accommodate 750 settlers, adding to the 2,000 Jews already residing within Palestinian neighbourhoods, the group said.

Such construction in East Jerusalem is taking place despite calls by the United States, Israel’s staunchest ally, and other western countries for Israel to freeze all building in occupied Palestinian territory, including in East Jerusalem.

Benjamin Netanyahu, Israel’s prime minister, is conducting intensive talks with the US on a compromise on the settlements issue. The two sides are expected to reach an agreement in coming weeks.

But Mr Netanyahu has insisted that Jerusalem is Israel’s “eternal, undivided” capital and during a visit to London and Berlin last week he said that “Jerusalem is not a settlement”. In July, he rejected a US call to halt Jewish construction in East Jerusalem, saying: “We cannot accept the idea that Jews will not have the right to live and buy [homes] anywhere in Jerusalem.”

Israeli media have reported that the administration of Barack Obama, the US president, may agree to continued Israeli building in East Jerusalem as part of a compromise that halts new construction in the occupied West Bank.

But Ms Oppenheimer cautioned that such expansion may be a “major threat” to solving the Israeli-Palestinian conflict. “Jerusalem is not just another house or hill,” she said.

Groups such as Ir Amim say settlers’ building schemes are part of a bid to establish Israeli strongholds within Palestinian areas to prevent them from being easily claimed by the Palestinians in any future peace pact. According to the groups, the settlers are aiming to establish an irreversible situation that would block any compromise on the city.

Israel won East Jerusalem from Jordan during the 1967 Arab-Israeli war and later annexed it in a move not recognised by the international community. The fate of Jerusalem is one of the most sensitive issues in the long-simmering Israeli-Palestinian conflict.

Palestinians want East Jerusalem as the capital of their future state, which would also include the West Bank and Hamas-ruled Gaza Strip. About 180,000 Jews live in East Jerusalem, including about 2,000 who reside in Palestinian neighbourhoods. About 270,000 Palestinians live in the eastern part of the city.

According to Ir Amim, the Jewish construction in East Jerusalem is “co-ordinated and facilitated” by the Jerusalem municipality and various ministries of the Israeli government.

Among the projects spurring the most concern among groups such as Ir Amim is a plan settlers have just submitted for approval to the Jerusalem municipality regarding Ras al-Amud, where 14,000 Palestinians reside. The plan includes building 104 housing units, a kindergarten, library, swimming pool and car park in the middle of the neighbourhood.

Akiva Eldar, a commentator for Haaretz, a liberal Israeli newspaper, yesterday said any backtracking by the Obama administration on a construction freeze in Jerusalem would be “so explosive that it would cause the negotiations between Israel and the Palestinians to crash and burn”.