JUDY WOODRUFF: The dispute between the U.S. and Israel over expanded settlements and the direction of the peace process threatens to boil over.
Jeffrey Brown has the story.
JEFFREY BROWN: Across East Jerusalem today, a Palestinian day of rage and the worst violence in months, as hundreds of stone-throwing youths faced off with Israeli troops and police.
The tension had been building since Israel announced plans last week to expand Jewish housing in disputed East Jerusalem. The decision came during a visit by Vice President Biden, and provoked a diplomatic clash with the United States, which wants a total freeze on the building of settlements.
On Friday, Secretary of State Hillary Clinton rebuked Israeli Prime Minister Benjamin Netanyahu during a lengthy telephone call. Today, though, she rejected talk of a relationship in crisis.
HILLARY RODHAM CLINTON, U.S. secretary of state: Oh, I don't buy that. I have been around, not that long, but a long time. We have a -- an absolute commitment to Israel's security. We have a close, unshakable bond between the United States and Israel.
JEFFREY BROWN: At the same time, Clinton sought to get all sides moving forward again.
HILLARY RODHAM CLINTON: We are engaged in a -- a very active consultation with the Israelis over steps that we think would demonstrate the requisite commitment to this process. I think that we will see what the next days hold, and we're looking forward to Senator Mitchell returning to the region and beginning the proximity talks.
JEFFREY BROWN: The return of George Mitchell, the president's special Mideast envoy, was supposed to come today. But the administration canceled that trip as the diplomatic row continued.
Prime Minister Netanyahu said Sunday he regrets the timing of last week's announcement, but he didn't back away from plans to keep building.
BENJAMIN NETANYAHU, Israeli prime minister (through translator): I do not think there is anything to add, but it's important is to emphasize that the state of Israel and the U.S. have mutual interests. But we will act according to Israel's key interests.
JEFFREY BROWN: And, today, Foreign Minister Avigdor Lieberman said that demands that Israel stop housing construction are -- quote -- "unreasonable."
In the meantime, U.S. military commanders are raising concerns about ripple effects on American troops fighting two wars in the Arab and Muslim world.
At a Senate hearing today, General David Petraeus denied a published report that he had sought to formally add the West Bank and Gaza to his Central Command. But he did say the conflict is a real issue for his forces.
GENERAL DAVID PETRAEUS, commander, U.S. Central Command: Clearly, the tensions, the issues and so forth have an enormous effect. They set the strategic context within which we operate in the Central Command area of responsibility.
JEFFREY BROWN: The effect on U.S. domestic politics will be felt next week, when the top U.S.-based pro-Israel lobbying organization, AIPAC, meets in Washington.
Yesterday, the group denounced the White House reaction to the Israeli settlement move, an issue sure to be front and center when both Secretary Clinton and Prime Minister Netanyahu address the group next week.