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The Middle East has been the graveyard for many U.S. presidents’ diplomatic ambitions. The best intentions and the dedication of considerable time and effort have done little to overcome the seemingly intractable Israeli-Palestinian conflict.

Yet rarely if ever has a U.S. president been insulted as plainly as Barack Obama was last week when, during a visit by Vice President Joe Biden, Israel announced that it would expand settlements in the West Bank. The move may trigger a crisis between Israel and the United States, its most important Middle East ally. At a minimum, it has hurt Israel’s position in stalled peace talks, and could even undermine the government of Prime Minister Benjamin Netanyahu.

Since taking office, Mr. Obama has identified a peace agreement between Israel and Palestinians as a foreign policy priority. His administration has pressed Israel to freeze the construction of new settlements on land claimed by both Israel and Palestinians as a first step toward the resumption of peace talks.

In November, the Israeli government announced a 10-month partial freeze on new settlements in the West Bank. Earlier this month, the Arab League endorsed the resumption of “proximity talks” in which a U.S. mediator would shuttle between the two sides, rather than have them talk directly — a second-best solution, but a sign of progress nonetheless. It would keep communications open and lay the ground for direct discussions.

The election of Mr. Obama has added a new wrinkle to the Israeli-Palestinian negotiation process. Simply put, Israel does not trust him. To overcome that problem, the U.S. has maintained high-level contacts and consultations with Tel Aviv. There has been a steady stream of ranking U.S. visitors to Israel, and Israeli officials have regular access to top officials in the administration.

U.S. policy under Mr. Obama has shown that there is little, if any, daylight between the positions of Washington and Tel Aviv. And Mr. Biden’s trip to Israel last week was intended to demonstrate the importance of the bilateral relationship.

That’s why the Israeli government’s announcement that it would proceed to build 1,600 settler homes in an area of the occupied West Bank it annexed to Jerusalem was so harshly interpreted by the U.S. Mr. Biden said it undermined the peace process — that it reversed whatever momentum may have been created by the Arab League decision — and further demonstrated his feelings by arriving two hours late to a dinner with the prime minister. U.S. Secretary of State Hillary Rodham Clinton had a “frank” 45-minute phone call with Mr. Netanyahu, in which she complained, said a State Department spokesman, that the announcement sent a “deeply negative signal about Israel’s approach to the bilateral relationship . . . and had undermined trust and confidence in the peace process.” Mrs. Clinton later said the move was “insulting” to the United States. U.S. special envoy George Mitchell has postponed his visit to Israel.

Israel has been perplexed by the U.S. reaction. Officials insist that there was an understanding that while settlements in the West Bank were to be frozen, it was always clear that Jerusalem was not part of that deal. Perhaps, but that does not excuse timing the announcement during Mr. Biden’s visit. Mr. Netanyahu has claimed he was unaware the announcement was going to be made at that time, a dodge that the U.S. has rightly rejected — as prime minister he is still responsible for what his government does. To add credence to his statement, Mr. Netanyahu announced the creation of a commission to study what happened and why.

One possible explanation is that Mr. Netanyahu is weak domestically. His supporters argue that he is the moderate in his coalition, and that he is powerless to block rightwing parties that want to expand settlements and have no desire for peace talks with the Palestinians. Hardline parties in the coalition government control the interior ministry, which made the announcement, and their constituents would benefit from the new settlements. In these circumstances, the prime minister would be unable to roll back plans for construction.

Another argument suggests that it is the U.S. that is hobbled politically, with the Obama administration distracted by domestic debates and on the defensive as midterm elections approach. The U.S. may complain but it will be unable to stop the creation of “facts on the ground” that make increasingly difficult any negotiations with the Palestinians. By expanding settlements on the eve of new talks, Israel has made the U.S., its negotiating partner, look weak. Indeed, it may result in the Palestinians hardening their position going into the talks.

At the center of the problem is the city of Jerusalem. East Jerusalem, claimed by Palestinians as their capital, was seized by Israel in the 1967 war; many Israelis now claim the unified city as their rightful capital. Israel’s leadership must recognize that “facts on the ground” will not create “facts” in people’s minds. And insulting their most important ally does not bolster their security.

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