Gordon Brown, the British prime minister has urged the Israeli parliament to consider making Jerusalem a capital of both a Palestinian and Israeli state, and to stop building settlements on Palestinian land.

In the first speech to the Israeli Knesset by a British prime minister, Brown also promised more aid to help revive the Palestinian economy.

Criticising Israel's move to continue building settlements, he said that the EU as a whole is clear about wanting a freeze.

He also told the parliament on Monday that Britain would continue to lead the West's efforts to stop Iran's nuclear programme and that the Iranian president's comments calling for the end of Israel were "abhorrent".

Settlement freeze

Brown struck a positive note in his address, saying an historic peace with the Palestinians was within Israel's grasp, describing the current leadership of the Palestinian authority as the best partner Israel has had for peace in a generation.

Al Jazeera correspondent David Chater said it was clear that "this was a speech from Brown’s heart as well as his head".

The key issues he touched upon regarding Palestinians were his plea to envision Jerusalem as the capital of both states of a two–state solution to the Israeli-Palestinian conflict, and to end Israeli settlement-building.

The right of return of Palestinian refugees, another divisive issue, was not mentioned.

"The place is as important as the words," Chater said.

"He is a prime minister that knows full well the complexities of issues here.

"As the Palestinian leader Mahmoud Abbas said, the expansion of settlements and outposts are the biggest obstacle to peace," Chater said.

"This is the first time a British prime minister actually mentioned the settlements. He didn't over emphasise it, but it was there."

Iran warning

Brown, on his first visit to Israel and the Palestinian-controlled territories since he took office last year, also warned Iran on Monday that it will face growing isolation if it rejects an offer from major powers on its disputed nuclear programme.

Brown pledged to stand by Israel and condemn threats against the country by Mahmoud Ahmadinejad, the Iranian president.

"Just as we have led the work on three mandatory sanctions resolutions of the United Nations, the UK will continue to lead, and our European Union partners, in our determination to prevent an Iranian nuclear weapons programme," Brown said.

The US, Britain, France, Germany, Russia and China have offered Iran financial and diplomatic incentives to halt nuclear activity which the West fears is a cover for making bombs. Tehran says it is aimed solely at generating electricity.

After talks in Geneva ended in stalemate on Saturday, the six powers gave Iran two weeks to answer calls to rein in its nuclear activities or face tougher sanctions.

British government officials travelling with Brown said if Iran did not accept the incentives, the next step would be to increase sanctions against Tehran, possibly
including sanctions on Iran's oil and gas industry.

They said such sanctions could seek to target Iran's domestic energy market by making it difficult for Iran to obtain equipment and spare parts for its refineries.