Trump must this week decide whether to sign a waiver keeping the embassy in Tel Aviv or fulfill a campaign promise and move it to Jerusalem.
President Donald Trump faced down warnings of widespread Middle East unrest and untold damage to the peace process Tuesday, telling anxious Arab leaders he still intends to move the US embassy to Jerusalem.
Amid a frantic round of telephone diplomacy, Trump told Palestinian leader Mahmud Abbas and Jordan's King Abdullah that the deeply controversial move was coming, but crucially did not give a timeframe.
Trump "informed the president (Abbas) on his intention to move the US embassy from Tel Aviv to Jerusalem," the Palestinian leader's office said in a statement that was echoed in Amman.
Trump must this week decide whether to sign a waiver keeping the embassy in Tel Aviv or fulfill a campaign promise and move it to Jerusalem -- de facto recognizing Israel's claim on the disputed city.
Such a move would please Trump's conservative and evangelical donors and voter base.
US officials said he will hold off on moving the embassy right away, but may issue a statement reiterating his intent and even go as far as recognizing Jerusalem as Israel's capital.
That could upend a decades-old western policy -- observed by both Republican and Democratic presidents -- that stated Jerusalem's status can only be decided by negotiation.
The White House argues that such a move would not prejudge final talks and would represent the reality that west Jerusalem is and will continue to be part of Israel under any settlement.
Still, it risks extinguishing Trump's efforts to broker Middle East peace and igniting the flames of conflict in a region already reeling from crises in Lebanon, Syria, Iraq, Yemen and Qatar.
"Mr Trump! Jerusalem is a red line for Muslims," Turkey's President Recep Tayyip Erdogan said in a raucous televised speech, echoing alarm expressed by Palestinian and Arab leaders.
In his address, Erdogan warned that any move to back Israel's claim to the city would mobilize "the entire Islamic world" and even prompt Ankara to sever its recently-renewed diplomatic ties with the Jewish state.
The armed Islamist Hamas movement has threatened to launch a new "intifada" or uprising.
Most of the international community, including the United States, does not formally recognize Jerusalem as Israel's capital, insisting the issue can only be resolved in final status negotiations.
A way must be found
Following talks in Brussels with US Secretary of State Rex Tillerson, top EU diplomat Federica Mogherini warned that any move which risked undermining efforts to jumpstart moribund peace talks "must absolutely be avoided."
"A way must be found through negotiations to resolve the status of Jerusalem as the future capital of both states, so that the aspiration of both parties can be fulfilled," she said.
In Cairo, Arab League chief Ahmed Abul Gheit warned it would be viewed as an act of "clear aggression" against the Arab and Muslim world.
Saudi Arabia also expressed "grave and deep concern" about the impact it would have on both the conflict and peace efforts, while the Palestinians said it would shatter any illusion about Trump's ability to fairly mediate in any talks.
"That totally destroys any chance that he will play a role as an honest broker," said Nabil Shaath, an adviser to Palestinian president Mahmud Abbas.
The Jerusalem Embassy Act
In Israel, however, hardline Defense Minister Avigdor Lieberman hailed the moment as a "historic opportunity" for Trump, expressing hope he would see the US embassy in Jerusalem "next week or next month".
The US Congress has already made its aim clear in the so-called Jerusalem Embassy Act, which was passed in 1995 and which stated that the city "should be recognized as the capital of the State of Israel" and that the US embassy should be moved there.
But an inbuilt waiver, which allows the president to temporarily postpone the move on grounds of "national security," has been repeatedly invoked by successive US presidents, meaning the law has never taken effect.
Israel seized the largely-Arab eastern sector of Jerusalem during the 1967 Six-Day War and later annexed it, claiming both sides of the city as its "eternal and undivided capital."
But the Palestinians want the eastern sector as capital of their future state and fiercely oppose any Israeli attempt to extend sovereignty there.
Several peace plans have unravelled over the issue of how to divide sovereignty or oversee sites in the city that are holy for Christians, Jews and Muslims.