JERUSALEM - Washington said on Friday it was reviewing its push for a Middle East peace agreement as a spiral of tit-for tat moves by Israel and the Palestinians brought hard-won talks close to collapse.
US Secretary of State John Kerry, who has invested more than a year of intensive shuttle diplomacy in the talks process, said there were "limits" to the time Washington could devote to it.
"This is not open-ended," Mr Kerry said on a visit to Morocco, adding that it was "reality check" time and he would evaluate with President Barack Obama what Washington does next.
"There are limits to the amount of time and effort that the United States can spend if the parties themselves are unwilling to take constructive steps," he said.
The US top diplomat spoke to both Israeli and Palestinian leaders on Thursday in a desperate bid to bring the two sides back from the brink.
But Palestinian president Mahmud Abbas rejected his appeals to withdraw the applications he signed on Tuesday to adhere to 15 international treaties, a Palestinian official told AFP.
And Israeli Prime Minister Benjamin Netanyahu ignored appeals to refrain from "unhelpful" tit-for-tat moves and asked officials to draw up a range of tough reprisals, Israeli media reported.
Mr Kerry said Washington currently had an "enormous amount on the plate," highlighting negotiations with the Russians over Ukraine, negotiations with Iran on its nuclear programme and the conflict in Syria, as other US priorities.
"Both parties say they want to continue, neither party has said they want to call it off; but we're not going to sit there indefinitely, this is not an open-ended effort," he said.
Israel says Tuesday's move by Mr Abbas was a clear breach of the undertakings the Palestinians gave when the talks were relaunched last July to pursue no other avenues for recognition of their promised state.
The Palestinians say Israel had already reneged on its own commitments when it failed to release a fourth and final batch of veteran Arab prisoners as scheduled at the weekend, and that the treaty move was their response.
On Thursday, Mr Kerry spoke to both Mr Netanyahu and Mr Abbas from North Africa to appeal to them to reconsider.
But Mr Abbas dismissed his warnings about the consequences of pressing ahead with the treaty applications, a Palestinian official told AFP on condition of anonymity.
Mr Kerry warned that "Israel was threatening a strong response to Palestinian actions," the official said.
But Mr Abbas retorted: "Israel's threats scare no one. They can do what they like," the official added.
Both sides insisted they remained ready to sit down at the negotiating table but as the steps and counter steps escalated the talks looked close to collapse, even before their scheduled end on April 29.
Mr Netanyahu asked the head of the Israeli military administration in the occupied West Bank, General Yoav Mordechai, to draw up a range of tough options to punish the Palestinians, the Haaretz newspaper reported.
The options under consideration include withholding tax revenues levied by Israel on behalf of the Palestinian Authority, the newspaper said.
Israel briefly imposed the same financially crippling measure in December 2012 to punish the Palestinians' successful drive for observer state status at the United Nations, over its own strong opposition and that of Washington.
Other options include tightening the restrictions imposed on Palestinian activities in the more than 60 per cent of the West Bank which is under the sole control of the Israeli army, Haaretz said.
The interior ministry also announced that it had given the green light for a controversial visitor centre in an Arab neighbourhood of annexed east Jerusalem in what was widely seen as a retaliatory measure.
Justice Minister Tzipi Livni, who is Israel's chief negotiator in the peace talks, told the Palestinians on Thursday that there had been a chance of a belated release of the final batch of prisoners, who had been scheduled to be freed last weekend.
But she said it had been scuppered by the Palestinians' treaty move, a source close to the talks told AFP.