Israel's plans to open up tenders for the construction of some 1,200 settlement homes in a strategically important part of the occupied West Bank have sparked fresh condemnation by major Western powers.

In a joint statement, the UK, France, Germany, Italy and Canada called the decision "unacceptable" and urged Israel to "retract the plans immediately".

All settlements are illegal under international law and, under international pressure, Israel held off for decades on plans to build in E1 to the east of Jerusalem.

Many of its allies and Palestinians argued this development would deal a major blow to hopes of a two-state solution, effectively cutting the West Bank in two and isolating east Jerusalem.

"At a time of grave instability in the West Bank with unprecedented levels of violence by settlers against civilians, and serious restrictions on the Palestinian economy, this decision is even more concerning", the statement from the European allies and Canada published on Thursday said.

"Not only will they [the plans] take us further from peace, but they further undermine Israel's international standing," the statement added.

In a separate statement, the UN secretary general also said the E1 plan posed an "existential threat" to a contiguous Palestinian state - and so did Belgium's foreign minister.

UK Foreign Secretary Ed Miliband's condemnation earlier on Thursday had drawn "ouright" rejection by the Israeli foreign minister.

Despite an Israeli court challenge to the plans by Bedouin Palestinians living in the area and Israeli peace groups, on Wednesday the Israeli housing ministry issued a tender for 1,234 of the 3,401 housing units approved by the Israeli government last August.

It covers about 12 sq km (4.6 sq miles) between East Jerusalem and the settlement of Maale Adumim.

At the time of their unveiling, Finance Minister Bezalel Smotrich - an ultranationalist and settler - said the idea of a Palestinian state was "being erased".

The deadline for bids is 19 October, just days before Israel's general election on 27 October, making it much harder for any future government to overturn any tenders issued.

Israel has built about 160 settlements housing 700,000 Jews since it occupied the West Bank and East Jerusalem - land Palestinians want, along with Gaza, for a hoped-for future state - during the 1967 Middle East war. An estimated 3.3 million Palestinians live alongside them.

Despite the fierce international opposition, successive Israeli governments have allowed settlements to grow.

However, expansion has risen sharply since Prime Minister Benjamin Netanyahu returned to power in late 2022 at the head of a right-wing, pro-settler coalition, as well as the start of the Gaza war, triggered by Hamas's 7 October 2023 attack on Israel.

Opponents of the E1 project have warned that it would effectively block the establishment of a Palestinian state because it would cut off the north of the West Bank from the south, and prevent the development in the centre of a contiguous Palestinian urban area connecting Ramallah, East Jerusalem and Bethlehem.