Israel must do more to pursue peace with the Palestinians and to strengthen their institutions or risk empowering militant groups such as Hamas, US Secretary of State Hillary Clinton said on Thursday.

US President Barack Obama's efforts to revive peace talks have been stymied by a disagreement over Jewish settlement construction that has strained ties between Washington and its close ally Israel and by divisions among the Palestinians.

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Obama has taken a much tougher line toward Israel than his recent predecessors, and on Tuesday he described solving the conflict as "a vital national security interest," suggesting he may be willing to push hard for a solution.

While Clinton said in a speech to a pro-peace group that the Palestinians should also promote peace by ending incitement, curbing corruption and refraining from inflammatory rhetoric, she appeared to put more responsibility on Israel.

"For Israel, accepting concrete steps toward peace – both through the peace process and in the bottoms-up institution building I have described – are the best weapons against Hamas and other extremists," Clinton said.

"Those who benefit from our failure of leadership traffic in hate and violence and give strength to Iran's anti-Semitic president (Mahmoud Ahmadinejad) and extremists like Hamas and Hezbollah," she added.

Hamas is a militant and political group that controls the Gaza Strip and is engaged in a power struggle with Fatah, the Palestinian faction that leads the Palestinian Authority and that governs the West Bank.

Hezbollah is a Lebanese political and military group that exercises control over large parts of southern Lebanon.

Fatah's weakness empowers Hamas

Speaking to the S. Daniel Abraham Center for Middle East Peace, Clinton argued that if Israel does not strengthen Fatah and the Palestinian Liberation Organization - which she called "a credible partner for peace" – it will empower Hamas.

"Israel can and should do more to support the Palestinian Authority's efforts to build credible institutions and deliver results," Clinton said.

"If (Palestinian) President (Mahmoud) Abbas cannot deliver on these aspirations, there is no doubt his support will fade and Palestinians will turn to alternatives - including Hamas. And that way leads only to more conflict," she added.

The Obama administration responded with outrage last month when Israel announced plans for the construction an additional 1,600 settler homes during a visit to the Jewish state by US Vice President Joe Biden. Clinton called the move "insulting."

The administration has since sought to calm the resulting US-Israeli tension, and Clinton on Thursday repeated her view that the US commitment to Israel is "rock solid." However, she also ticked off a long list of action points for Israel.

"We encourage Israel to continue building momentum toward a comprehensive peace by demonstrating respect for the legitimate aspirations of the Palestinians, stopping settlement activity, and addressing the humanitarian needs in Gaza," she said. "And to refrain from unilateral statements and actions that could undermine trust or risk prejudicing the outcome of talks."

The United States on March 3 said Israel and the Palestinian Authority had agreed to indirect peace talks but the US-Israeli settlement dispute appears to have scotched any chance of these beginning in earnest any time soon.