The two-week-old dispute between Israel and the United States over housing construction in East Jerusalem has exposed the limits of American power to pressure Israeli leaders to make decisions they consider politically untenable. But the blowup also shows that the relationship between the two allies is changing, in ways that are unsettling for Israel's supporters.

President Obama and his aides have cast the settlement of the Israeli-Palestinian conflict, not just the relationship with Israel, as a core U.S. national security interest. Gen. David H. Petraeus, the head of the military's Central Command, put it starkly in recent testimony on Capitol Hill: "The conflict foments anti-American sentiment due to a perception of U.S. favoritism toward Israel." His comments raised eyebrows in official Washington -- and overseas -- because they suggested that U.S. military officials were embracing the idea that failure to resolve the conflict had begun to imperil American lives.

Visiting Israeli Prime Minister Binyamin Netanyahu received warm applause at the American Israel Public Affairs Committee (AIPAC) conference on Monday night when he bluntly dismissed U.S. demands to end housing construction in the disputed part of Jerusalem. He was greeted as a hero when he visited Capitol Hill on Tuesday.

But the administration has been strikingly muted in its reception. No reporters, or even photographers, were invited when Netanyahu met with Secretary of State Clinton Hillary Rodham Clinton and Vice President Biden on Monday or when he met with Obama on Tuesday night. There was no grand Rose Garden ceremony. Official spokesmen issued only the blandest of statements.

The cooling in the U.S.-Israel relationship coincides with an apparent deepening of Israel's diplomatic isolation. Anger has grown in Europe in the wake of Israel's suspected misuse of European passports to kill a Palestinian militant in Dubai, the United Arab Emirates. On Tuesday, British Foreign Secretary David Miliband announced the expulsion of a senior diplomat over the incident, an unusually drastic step for an ally. Relations with Turkey, a rare Muslim friend of Israel for decades, have hit a new low.

Obama and his aides have strongly pledged support for Israel's security -- including a reiteration by Clinton when she addressed AIPAC on Monday -- but they have continued to criticize its settlement policies in tough terms. Clinton notably did not pull her punches on the issue when she addressed the pro-Israel group, warning that whether Israelis like it or not, "the status quo" is not sustainable. The drawing of such lines by the administration has been noticed in the Middle East.

"Israeli policies have transcended personal affront or embarrassment to American officials and are causing the United States real pain beyond the Arab-Israeli arena. This is something new, and therefore the U.S. is reacting with unusually strong, public and repeated criticisms of Israel's settlement policies and its general peace-negotiating posture," Rami Khouri, editor at large of Beirut's Daily Star, wrote this week. "At the same time Washington repeats it ironclad commitment to Israel's basic security in its 1967 borders, suggesting that the U.S. is finally clarifying that its support for Israel does not include unconditional support for Israel's colonization policies."

Problems from the start

The Obama administration has struggled from the start to find its footing with Israel and the Palestinians. Obama took office soon after Israel's three-week offensive in the Gaza Strip, which had ruptured peace talks nurtured by the George W. Bush administration. Obama appointed a special envoy, former senator George J. Mitchell, on his second day in office. But then the administration tried to pressure Israel to freeze all settlement expansion -- and failed. The United States further lost credibility when Clinton embraced Netanyahu's compromise proposal, which fell short of Palestinian expectations, as "unprecedented."

U.S. pressure at the time also backfired because it appeared to let the Palestinians off the hook. Palestinian Authority President Mahmoud Abbas refused to enter into direct talks before a settlement freeze, even though he had done so before. The administration had to settle for indirect talks, with Mitchell shuttling back and forth. The recent disagreement has set back that effort.

Administration officials have been careful to turn down the heat in their latest exchanges with Netanyahu over Jerusalem, even as they continue to express their displeasure. State Department spokesman P.J. Crowley spoke in clipped sentences Tuesday when asked to describe the hours of private conversations with Netanyahu this week: "We have outlined some concerns to the Israeli government. They have responded to our concerns. That conversation continues. This is a dynamic process. There's a lot of give-and-take involved in these conversations."

Crowley argued that "the only way to ultimately resolve competing claims, on the future of Jerusalem, is to get to direct negotiations." He said the administration faces a series of "pass-fail" tests: Can it get the two parties to join direct talks? Can it persuade them to address the vexing issues surrounding the final status of Jerusalem? And ultimately, "do we get to an agreement that is in the Israeli interest, in the Palestinian interest, in the interest of the rest of the region and clearly in the interest of the United States?"

Arab leaders have long said that a peace deal would be possible if the United States pressured Israel. But many experts say such hope is often misplaced. In the case of East Jerusalem, Netanyahu believes that a halt to construction represents political suicide for his coalition, so no amount of U.S. pressure will lead him to impose a freeze -- at least until he is in the final throes of peace talks.

"U.S. pressure can work, but it needs to be at the right time, on the right issue and in the right political context," said Robert Malley, a peace negotiator in the Clinton White House. "The latest episode was an apt illustration. The administration is ready for a fight, but it realized the issue, timing and context were wrong. The crisis has been deferred, not resolved."