It is not often that a diplomatic row plays out in front of a global audience - especially when two heads of state are involved. So it was no small matter that the US president Barack Obama openly expressed his dismay at the newly announced Israeli settlements in East Jerusalem during his visit to Indonesia this week.

Mr Obama's frustration was clear even in his restraint. That settlement activity is "unhelpful" belies a growing US impatience with the Israeli government. And with due cause: with construction planned in East Jerusalem and Ariel - a West Bank settlement that the Israeli prime minister personally defended last month - there is little evidence that Mr Netanyahu nor his government feels any compunction to continue talks with the Palestinian Authority. Indeed, the prime minister's defensive statement that "Jerusalem is not a settlement" and that there is no "connection between the peace process and the building and planning policy in Jerusalem" shows that his party and coalition are either unable or unwilling to debate more than semantics.

This must change. Without a concession on settlements, Mahmoud Abbas, the Palestinian Authority president, has said he will not return to the negotiating table. Indeed, more than a month since the two parties were last at the table, Mr Abbas's team is already floating contingency plans to bypass Israel in seeking Palestinian statehood. Mr Abbas has been consulting with Amr Moussa, the head of the Arab League, who has gone so far as to say that "a process of negotiations under the present circumstances is useless and, in fact, harmful".

The frustration is boiling over. It must now create enough steam to get the negotiations started again.

With midterm elections behind him, Mr Obama has all the political space he needs to pressure a recalcitrant Israel. And press he must: after the US vice president Joe Biden's assurance a few days ago that differences between the countries were "tactical in nature, never fundamental", the announcement of new settlements is another slap in the face to the US, to the Palestinians, and to the entire process.

The US has thus far chosen to turn the other cheek to an impudent ally. But as an ally, the US also has an obligation to set its friend straight.

Increasingly, the Palestinians are looking at the UN and EU as more suitable partners for peace. The US now has a chance to prove that it is an honest broker. Mr Obama must make the most of this opportunity.