Sirens blared across Israel on Tuesday as the nation carried out its biggest-ever "doomsday" drill meant to simulate a catastrophic attack.

The faux fears, however, were overshadowed by deepening anxiety in Jerusalem that Israel is heading for an unavoidable political showdown with President Barack Obama over the center-right government's refusal to stop building Jewish homes in the predominantly Palestinian West Bank.

Yedioth Ahronoth, Israel's largest daily newspaper, carried a front-page story Tuesday bluntly titled: "The American Threat."

Its biggest competitor, Maariv, carried a bold headline: "Pressure."

The building apprehension comes as Obama is preparing to make a direct appeal to the Islamic world in Cairo on Thursday that's widely seen as a chance for the U.S. to launch a new, more cooperative era with Arab nations in the Middle East.

Central to the success of Obama's attempts to reshape America's image in the region will be a shift in U.S. policy toward Israel.

And for many, the heart of that discussion is Israel's refusal to stop building Jewish settlements in the West Bank.

Under the 6-year-old Road Map for Middle East Peace, drafted by the Bush administration, Israel is supposed to stop all settlement construction in the West Bank, including development in major settlements that Israel expects to retain in any peace deal.

Israeli leaders accepted the plan but imposed their own interpretation of the proposal and argued that they had the right to continue building in existing settlements.

The Bush administration never seriously challenged Israel on this point. Obama, however, has stated plainly that Israel must honor its commitment to stop all settlement construction. Period.

"It is important for us to be clear about what we believe will lead to peace and that there's not equivocation and there's not a sense that we expect only compromise on one side," Obama told National Public Radio on Monday. "It's going to have to be two-sided."

That stand has set off alarms in Jerusalem, where Israeli Prime Minister Benjamin Netanyahu said this week that Obama's call for Israel to accept the Road Map conditions was "unrealistic."

In an apparent attempt to offer Obama a goodwill gesture as he prepared to deliver his Cairo speech, Israel demolished a small number of trailers in rustic settlements established by extremist Jewish settlers who're opposed to ceding West Bank land so Palestinians can establish a state.

The steps don't appear to be enough for the Obama administration, which has stepped up its public pressure on Israel to do more.

"The issue of settlements is not a very comfortable one for Israel's backers," said Oded Eran, the director of Israel's Institute for National Security Studies. "Israel is divided about this issue, and its friends are divided about this issue, so I think if the president concentrates on settlements, it will be difficult for Israel to call on its friends to defend them."

Obama's stance is drawing particular ire in the West Bank settlements.

"Everyone is against us, and it's sad and frustrating," said Hila Nahum, a 27-year-old resident of Maale Adumim, one of the largest Jewish settlements outside Jerusalem. "He's either changed his position on Israel or he wasn't honest about it before the election. He knew from the start that Israel had settlements."

Dudi Cohen has been living in Maale Adumim for 10 years and recently moved to one of its newest neighborhoods.

Israel should dismantle the smaller renegade outposts, Cohen said, but continue building in places such as Maale Adumim to meet the needs of a growing Israeli population.

"There's no reason to put a couple (trailer homes) on some hill somewhere, but I'm in favor of growth," Cohen said. "The price of apartments in the big cities is very high, so people need to move to the periphery like in Maale Adumim."

The biggest question for Israel if Obama stands by his words is: How far is he willing to go to apply pressure?

The U.S. has used its economic clout at various times to try to change Israeli policies.

During the George H.W. Bush presidency, Israel asked the U.S. for $10 billion in loan guarantees to help absorb a wave of immigrants from the former Soviet Union.

The first Bush administration held up the money in response to Israeli settlement building, and a compromise was finally reached. The guarantees were spread over five years, and each year the money spent on settlements was deducted from the loan guarantees — in 1994, $437 million was deducted.

A similar deal was reached during the George W. Bush presidency, with another set of loan guarantees in 2003.

Obama sidestepped questions this week when asked by the BBC if he was prepared to take similar steps.

"One of the things, in the 24/7 news cycle, is very difficult to encourage is patience," Obama told the BBC. "And diplomacy is always a matter of a long, hard slog. It's never a matter of quick results."