JERUSALEM - Israeli Prime Minister Benjamin Netanyahu late Tuesday cancelled plans to build 20,000 new settler homes in the West Bank, hours after their announcement sparked US and Palestinian criticism.

Netanyahu ordered Israeli Housing Minister Uri Ariel “to reconsider all of the steps for evaluating planning potential (for the settler homes) that he distributed without any advance coordination,” a statement from Netanyahu’s office said.

Netanyahu told Ariel the plan was “meaningless” legally - “and an action that creates an unnecessary confrontation with the international community at a time when we are making an effort to persuade elements in the international community to reach a better deal with Iran,” according to the statement. Ariel was said to “accede” to Netanyahu’s “request”.

The prime minister’s order came after Palestinian president Mahmud Abbas warned the construction plans, announced earlier Tuesday by Ariel’s ministry, would prompt him to declare the peace process over if they went ahead.

Washington expressed “deep concern” at the move, which threatened to add sharply to the 550,000 Israeli settlers already living in the occupied West Bank, including annexed Arab east Jerusalem.

Netanyahu made it clear the housing ministry’s call for tenders for the homes threatened to distract from his efforts to convince world powers to not sign a deal with Iran, over its nuclear programme, he considered inadequate.

Meanwhile, Israeli Intelligence Minister Yuval Steinitz on Wednesday urged “coordinated” settlement building, a day after a new plan for settler homes in the West Bank drew international condemnation.

Meanwhile, an Israeli soldier died on Wednesday after a Palestinian youth stabbed him on board a bus in the north of the country, police said.

“The Israeli soldier who was stabbed this morning by a Palestinian on a bus at the Afula bus station has died of his wounds in hospital,” police spokesman Micky Rosenfeld told AFP.

Earlier, police had said he was in “critical condition” in hospital after the attack.

The 16-year-old Palestinian from Jenin in the northern West Bank was detained by passengers and security forces on the bus, Rosenfeld said.

“We consider this incident to be a terrorist attack motived by nationalism,” he added.

Palestinian President Mahmoud Abbas said on Wednesday his peace negotiators had resigned over the lack of progress in U.S.-brokered statehood talks clouded by Israeli settlement building.

The development would mark a new low point for the talks with Israel that resumed in July and which officials from both sides have said have made little headway.

In an interview with Egyptian CBC television, Abbas suggested the negotiations would continue even if the Palestinian peace delegation stuck to its decision.

“Either we can convince it to return, and we’re trying with them, or we form a new delegation,” he said.