Tension between the United States and Israel went up a notch on Monday when Israeli Prime Minister Benjamin Netanyahu said construction in occupied East Jerusalem would continue as usual.

"Construction will continue in Jerusalem as has been the case over the past 42 years," Netanyahu told members of his Likud party.

The United States, meanwhile, pressed Israel to cancel plans to build 1,600 housing units for Jews in the Arab section of East Jerusalem, which it announced during US Vice President Joe Biden's visit to the country last week. Speaking on condition of anonymity, Obama administration officials said whatever Israel does must be a significant step to restore confidence and move peace efforts ahead. Israeli officials said Washington wants the construction project canceled.

There were unconfirmed reports on Monday that the Obama team upped its ante by delaying its Middle East envoy George Mitchell's scheduled trip to the region this week.

In an unusual move, the American Israel Public Affairs Committee (AIPAC) made a public call on the White House to tone down the rhetoric. The lobby said statements made by senior officials in the administration were "very worrying."

But Netanyahu still plans to travel to Washington next week to participate in the American Israel Public Affairs Committee's annual policy conference, sources in his office said Sunday night. And Secretary of State Hillary Clinton is also still expected to address the pro-Israel group, said US officials.

The standoff has become a hot issue in Washington: "It is clear that the present crisis is more than a tempest in a teapot; it is a crisis between the Obama administration and the government of Israel," said Ziad Asali, president of the Washington-based American Task Force on Palestine. "This issue has now gone public because of the administration's frustration with the Israeli government's actions, after all the effort that the administration has put in getting the parties to negotiate."

In Washington, many opinion writers came out harshly against the Obama team. "The current friction in US-Israel relations has one source: the mishandling of those relations by the Obama administration," wrote Elliot Abrams, senior fellow for Mideast studies at the Council on Foreign Relations. "Polls show that Israel is as popular as ever among Americans ... (and has) a higher approval rating these days than does President Obama."

"The Obama administration can't seem to come up with a response ... Of toughness and reassurance with the Israelis that would drive a coherent strategy. Caught up in tactics, the Obama team can't decide whether it wants to pander to the Israelis or punish them," noted Aaron David Miller, public policy fellow at the Woodrow Wilson Institute.