JERUSALEM (AFP) – US Secretary of State Hillary Clinton was to meet Palestinian president Mahmud Abbas Thursday after he renewed his threat to quit peace talks in a row over Jewish settlements in the occupied West Bank.

The meeting at 10:30 am (0830 GMT) follows two days of inconclusive peace talks with Israel overshadowed by the impending expiry of a partial halt to settlement construction later this month that threatens to derail the talks.

Abbas had met with Israeli Prime Minister Benjamin Netanyahu and Clinton for another round of direct peace talks that sought to address the core issues of the decades-old conflict.

But he warned that if the partial ban on new settlement construction is not extended at the end of the month he will walk out of the negotiations, which were relaunched earlier this month after a 20-month hiatus.

Netanyahu has refused to renew the moratorium but hinted he would rein in building after US President Barack Obama urged him to extend the restrictions.

A senior Palestinian official who asked not to be named said Netanyahu told Abbas on Wednesday that settlements “will continue,” causing Abbas to respond: “If settlement construction continues, I will stop negotiations.”

US envoy George Mitchell meanwhile said late Wednesday that the two-day talks in Egypt and Jerusalem had been “serious and substantive” and that they had made “progress” on the issue of settlements, without elaborating.

He also said the two leaders again tackled the issues at the heart of their decades-old conflict — Israel’s security, the borders of a future Palestinian state, the fate of Palestinian refugees and the status of Jerusalem.

“The two leaders are not leaving the tough issues to the end of the process,” Mitchell told reporters.

“We take this as a strong indicator that peace is possible and of their desire to conclude an agreement.”

Clinton had earlier expressed a similar view, saying: “This is the time and these are the leaders, and the United States will stand by them as they make difficult decisions.”

In opening the three-way meeting, Netanyahu said: “It’s a lot of work. I’m glad to have the opportunity to welcome President Abbas and Secretary Clinton here pursuing peace, and I think we should get on with it.”

Throughout the day, Clinton held a series of closed-door meetings with senior Israeli and Palestinian officials, including Israeli Foreign Minister Avigdor Lieberman, who strongly opposes any extension of the moratorium.

Mitchell said the two sides agreed on Wednesday to have their negotiators meet again next week to pave the way for another meeting of the leaders.

The US envoy was set to hold talks in Damascus on Thursday with President Bashar al-Assad aimed at reviving Syrian-Israeli peace talks, while Clinton was to hold talks with Jordan’s King Abdullah II in Amman.

Hours after Clinton arrived in Israel late on Tuesday, Palestinian militants fired a rocket at the southern port city of Ashkelon, followed by mortar fire.

The attacks, which caused no casualties, were claimed by the Popular Resistance Committees, a small militant group opposed to the talks.

In response, the Israeli air force bombed targets in southern Gaza, killing one Palestinian and wounding two.

The violence underscored the potential for an explosive confrontation with Hamas, the Islamist rulers of Gaza who vehemently oppose the peace talks and were the target of a devastating 22-day war in December 2008 and January 2009.