Israeli settlers on horseback set fire to fields of olive trees and stoned Palestinian cars in the West Bank yesterday, apparently in response to the Israeli army’s removal of an illegal outpost in the area.

At least 1,500 Palestinian-owned trees were destroyed and two Palestinians were injured in the attack, near the city of Nablus, by about 30 settlers, security officials said. Farmers fought fires late into the afternoon, as fears grew that the flames would spread across the dry summer fields.

It was the most recent example of the “price tag” policy, in which settlers seek revenge by attacking Palestinians for every outpost that is demolished. “The goal is to create a price for each evacuation, causing Israeli authorities to think twice about carrying them out,” the Israeli human rights group Yesh Din said.

A settler activist, Itamar Ben-Gvir, put it more directly: “We will not be suckers for the Israeli Government. We will not sit idly by and allow them to remove our homes,” he said.

Palestinians in Nablus said the attackers came from the nearby area of Yitzhar, considered to be one of the most hardline of Israel’s West Bank settlements.

Binyamin Netanyahu, the Israeli Prime Minister, has pledged to dismantle some of Israel’s illegal outposts as a goodwill gesture — but settler leaders have sworn to rebuild two for every one that is taken down.

The settlements, built on land earmarked for a future Palestinian state, have emerged as a key sticking point in efforts between Israel and the international community to forge a peace deal. While the US and Britain have pushed Israel to agree to a complete settlement freeze and the dismantling of dozens of outposts, the Jewish state has sought a compromise that would mean only a partial freeze, and the completion of 2,500 homes already in the late stages of construction.

The US envoy George Mitchell will visit the area this week but his impending arrival has sparked a row over how much Mr Netanyahu will be willing to concede.

“We cannot accept the fact that Jews wouldn’t be entitled to live and buy anywhere in Jerusalem,” said Mr Netanyahu, in response to a request by Washington that he stop a planned settler housing project at the Shepherd’s Hotel in east Jerusalem.

He called Israel’s sovereignty over the entire city “indisputable”. Israelis and Palestinians view Jerusalem as their capital and east Jerusalem holds several sites holy to Jews, Christians and Muslims.

The case of the Shepherd’s Hotel, in the Sheikh Jarrah neighbourhood of the city, has been seen as a typical example of Jewish expansion in a predominantly Arab neighbourhood. The American millionaire Irving Moskowitz, who purchased the building in 1985, plans to demolish it and build apartments in its place. The hotel sits amid several diplomatic missions, including the British consulate.

The US and Britain have asked Israel to stop the building project but aides close to Mr Netanyahu said the issue was not up for discussion.

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