Israel’s finance minister backed plans on Thursday to build 3,400 homes in a particularly contentious area of the occupied West Bank, calling for the territory’s annexation in response to several countries’ plans to recognise a Palestinian state.

The United Nations chief warned that building Israeli homes in the area would “put an end to” hopes for a two-state solution to the Israeli-Palestinian conflict.

Israel has long had ambitions to build on the sensitive parcel of land east of Jerusalem known as E1, but the plan has been frozen for decades amid international opposition.

Israeli settlements in the West Bank are considered illegal under international law, while critics and the international community have warned construction on the roughly 12 square kilometres would undermine hopes

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