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US Secretary of State Hillary Clinton has expressed frustration at the latest setback to Israeli-Palestinian peace talks, but insisted that the US would continue to push for progress.

She vowed to promote indirect talks on "core issues" including borders, settlements, refugees and Jerusalem.

Direct talks were set up with great fanfare by President Barack Obama.

But earlier this week the US abandoned efforts to persuade Israel to stop new construction of Jewish settlements.

Peace talks between Israel and the Palestinians resumed in September after a break of almost two years.

But they were suspended within weeks when Israel decided not to extend the 10-month freeze on settlement building in the West Bank.

Ms Clinton said the time had come to "grapple with the core issues of this conflict: on borders and security, settlements, water and refugees and on Jerusalem itself."

She was making her first comments on the deadlock since Washington said it had abandoned efforts to persuade Israel to stop the construction of new Jewish settlements - something which the Palestinians are insisting on before direct talks can progress.

Ms Clinton repeated the US commitment to Israel's security, even as she explained why the US viewed Israel's construction of Jewish settlements on Palestinian land as illegitimate.

"Like many of you, I am frustrated that we have not gotten farther, faster," Ms Clinton said in a speech at the Saban Forum, a Middle East policy seminar sponsored by the Brookings Institution think tank.

Stressing that a negotiated solution remained the only way forward, she said the US would resume the role of broker, opening talks with both parties on vital issues

"We will push the parties to lay out their positions on the core issues without delay, in good faith, and with real specificity," she said.

Ms Clinton's speech was the first Middle East policy address following the US's abandoning its efforts to persuade Israel to halt construction of Jewish settlements in the West Bank.

Using plain language and a sometimes stern tone, she said America was "serious about peace" and would be "persistent" in its search for a solution.

Two years of preaching about the need for negotiations had not changed anything, Mrs Clinton said: "There is no viable alternative to reaching mutual agreement. The stakes are too high, the pain too deep, and the issues too complex for any other approach."

Both Israel and the Palestinians had clear motives for seeking peace, she said, explaining that without a resolution to the conflict, Israelis could become a minority within their current borders and Palestinians would be unable to sustain "the lack of peace and the occupation that began in 1967".

But she had some stark words for political leaders on both sides.

The land between the Jordan River and the Mediterranean Sea was "finite", she said, and the people who live there need a clear border to map out their futures.

"Palestinians must appreciate Israel's legitimate security concerns. And Israelis must accept the legitimate territorial aspirations of the Palestinian people. Ignoring the other side's needs is in the end self-defeating."

Mr Obama has identified continued US engagement in peace talks as a key policy goal.

But the Palestinians have vowed not to return to the negotiating table while Israel continues building on West Bank settlements.

Last month the Obama administration offered Israel a sizeable package of incentives, including jet fighters and security guarantees, in return for a 90-day extension of a previous moratorium on settlement-building.

Israeli Prime Minister Benjamin Netanyahu offered to renew the freeze if the Palestinians recognised Israel as a Jewish state, but the Palestinian Authority dismissed the idea.