Palestinians are planning a "day of rage" on Friday in response to the US wielding its veto against a UN security council resolution condemning Israeli settlements.

The US decision to use its veto has sparked a furious reaction in the West Bank and Gaza.

Anti-US rallies took place in the West Bank towns of Bethlehem, Tulkarem and Jenin this weekend after the 14-1 vote on the resolution, in which the US stood alone against the rest of the security council, including Britain, Germany and France. It voted in contradiction of its own policy.

In Gaza, Hamas described the US position as outrageous and said Washington was "completely biased" towards Israel.

Ibrahim Sarsour, an Israeli-Arab member of the Israeli parliament, the Knesset, said it was time to tell the US president, Barack Obama, to "go to hell".

"Obama cannot be trusted," he wrote in an open letter to the Palestinian president, Mahmoud Abbas. "We knew his promises were lies. The time has come to spit in the face of the Americans."

The Egyptian foreign ministry said the US veto would "lead to more damage of the United States' credibility on the Arab side as a mediator in peace efforts".

The use of the veto for the first time under Obama will strengthen perceptions in the Arab world that for the US, protection of its ally Israel overrides its desire for a just outcome for Palestinians in the decades-old conflict.

The move is likely to impede US efforts to persuade the parties to return to peace negotiations, which stalled in September over the issue of settlement expansion.

With protests raging across the Middle East against repression, corruption, food prices and dismal economic prospects, Washington is acutely aware that distrust of the US is widespread in the region.

The Israeli prime minister, Binyamin Netanyhu, said his country "deeply appreciated" the US use of its veto.

However, some Israeli commentators warned that the vote served to reinforce Israel's international isolation and said Washington would expect a payback from its ally. They suggested the US would be unwilling to use its veto in similar circumstances again.

The opposition leader, Tzipi Livni, said Israel was "now in political collapse".

"We now find that Germany, Britain and France – all friends of Israel who want to help it defend itself – voted against the positions of Israel, and the US is being pushed into a corner and finds itself with Israel against the world," she said.

The vote, on Friday night, followed frantic diplomatic efforts to prevent the tabling of the resolution, which was carefully worded to reflect official US policy on settlements.

Obama spoke to Abbas on the phone for 50 minutes on Thursday, offering a package of inducements, including public statements, to withdraw the resolution.

According to the Palestinian press, Obama also suggested US aid to the Palestinian Authority could be halted if the resolution went ahead.

The US secretary of state, Hillary Clinton, made a further telephone call to Abbas on Friday to put pressure on him to abandon the resolution.

However, the Palestinian president – aware of the volatile mood in the region and the backlash he would face if he acceded to Obama's demands – refused to withdraw. One Palestinian official told Reuters that "people would take to the streets and topple the president" if he backed down.

After the vote, the US ambassador to the UN, Susan Rice, told the security council that Washington agreed with "our fellow council members, and indeed with the wider world, about the folly and illegitimacy of continued Israel settlement activity".

But she added: "We think it unwise for this council to attempt to resolve the core issues that divide Israelis and Palestinians."

Underlying the growing gap between the US and Europe on the Israeli-Palestinian issue, Britain, France and Germany issued a joint statement saying settlement construction was against international law.

The veto served to unite the political rivals Hamas and Fatah in condemnation. Palestinian leaders are considering whether to take a resolution on Israel's settlement policies to the UN general assembly.