President Barack Obama brokered the direct talks that were relaunched in September but broke down over the issue of settlements built on captured land that Palestinians seek for a state.

"We reached the conclusion this is not the time to renew direct negotiation by renewing the moratorium," a senior U.S. diplomat told reporters in Israel, ending weeks of intense U.S. diplomacy aimed at forging a settlement deal.

Palestinians have said they would not engage in any direct talks while Israelis build on territory seized in the 1967 Middle East War.

The decision marked a significant foreign policy setback for Obama, who had appealed personally to Israel to extend its temporary construction freeze.

Obama, in launching the talks in September, said he hoped to have a peace deal signed in a year, but the lack of a settlement agreement and the collapse of direct talks appeared to put that timeline in doubt.

Reuters