Senior officials at the White House and the US State Department held a confidential meeting to discuss the possibility of leveling sanctions against Israel to deter the Israeli government from launching new construction projects in settlements across the West Bank and in East Jerusalem neighborhoods, Israeli officials were quoted as saying on Thursday.

According to Israeli daily Haaretz, the Obama administration discussion took place following Prime Minister Benjamin Netanyahu’s October meeting with US President Barack Obama in Washington and against the backdrop of the subsequent public spat over Israeli building plans in East Jerusalem’s Givat Hamatos area.

The White House has not yet decided how or when to implement any such sanctions against Israel, the report said, quoting senior Israeli officials. US officials had no comment on the report.

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The imposition of sanctions on Israel over its policies in the West Bank would mark a significant diplomatic shift for the US, which over the past years has consistently condemned building over the pre-1967 lines but has not taken concrete steps to try to curb such activity.

US-Israel relations were plunged into crisis in October, after news that a Jerusalem planning committee had signed off on the final stage of approval for construction of some 2,500 homes for Jews and Arabs in the Givat Hamatos neighborhood prompted the Obama administration to issue some of the strongest language it had ever employed to criticize Israel. The condemnation included a warning that Israel was endangering its relations with “even its closest allies.”

Nearly identical, stridently critical comments on the Givat Hamatos building plans were issued by the spokespeople of the State Department and the White House, only hours after Netanyahu and Obama held their session at the White House.

The US statements, which also came shortly after an ultra-nationalist Jewish group said dozens of settlers would move into six apartment buildings purchased in the heart of the predominantly Arab neighborhood of Silwan in East Jerusalem, suggested that Washington felt deeply embittered and blindsided by Israel’s moves, viewing Netanyahu as disingenuous when he said he wanted the US to help him win over Arab states to warm their ties with Israel and advance a two-state solution with the Palestinians.

Netanyahu, for his part, rejected the American statements, stressing to reporters upon his return from the White House that he did not accept the Obama administration’s position on the issues of both Silwan and Givat Hamatos. He said the US had been informed of developments in Silwan, but not updated about the Givat Hamatos approval process, which he said was merely a “statutory formality that does not require publicizing.” He said discussion of the settlement issue in the White House meeting was not heated.

The Israeli leader later said he would not accept restrictions on where Jews could live in Jerusalem, adding that he was “baffled” by the American condemnation.

“It’s against the American values. And it doesn’t bode well for peace,” he said during an interview with CBS. “The idea that we’d have this ethnic purification as a condition for peace, I think it’s anti-peace.”

News agencies contributed to this report.