Rice makes her 18th visit to the Middle East [AFP]

The report on settlement expansion coincided with the 18th visit by Condoleezza Rice, the US secretary of state, to the Middle East, on Tuesday.

Rice urged Israel to stop expanding settlements, deemed illegal under international law, arguing that they were not helpful to the peace process.

"What we need now are steps that enhance confidence between the two parties and anything that undermines confidence between the parties ought to be avoided," she said.

Settlement 'noise'

The report by Peace Now, a non-governmental organisation, said that at least 2,600 new homes for Israelis are currently under construction in the West Bank, an increase of 80 per cent over last year.

In occupied East Jerusalem, which Palestinians want as the capital of their future state, the number of new government bids for construction has increased from 46 in 2007 to 1,761 so far this year.

Palestinians say the construction of Israeli homes undermines final status talks as it runs counter to earlier agreements, but Tzipi Livni, the Israeli foreign minister, said the construction will not affect talks.

"The peace process is not, and should not be, affected by any kind of settlement activities," Livni said.

Livni urged the Palestinians not to use settlement building "as an excuse" to avoid negotiations, but added she understood "their frustration" at times.

Rice said she still aims to reach a peace accord by January, when George Bush, the US president, leaves office, but she has played down chances of striking any partial accord in time for the September UN General Assembly.

Meanwhile, Ehud Barak, Israel's defence minister, will arrive in Egypt on Tuesday where he is due to meet Hosni Mubarak, the Egyptian president, to discuss the ceasefire in Gaza that has been in effect since mid-June.

The two leaders will think of ways to renew talks on the release of Gilad Shalit, an Israeli soldier captured by Hamas fighters near Gaza in June 2006.

Barak ordered the closure of all border crossings into Gaza on Monday after two rockets were fired from the strip.

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