US President Joe Biden has approved sanctions on four Israeli settlers accused of attacking Palestinians in the occupied West Bank.
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Mr Biden signed a broad executive order, saying violence in the West Bank had reached "intolerable levels".
The sanctions block the individuals from accessing all US property, assets and the American financial system.
Violence in the West Bank has spiked since Hamas launched an unprecedented attack on Israel on 7 October.
Some 370 Palestinians have been killed in the West Bank since then, according to the UN. The majority of those have been killed by Israeli forces but at least eight of them have been killed by Israeli settlers, the UN said.
The new executive order means the US government has the power to sanction any foreign nationals who attack, intimidate or seize the property of Palestinians.
The sanctions are a first by the US administration - a rare step targeting Israelis - and comes as Mr Biden travels to the state of Michigan, which has a large Arab-American population that has been critical of his support for Israel.
The Arab American Institute, an advocacy group, earlier said that since the start of the conflict, support by Arab Americans for the Democratic Party has plummeted from 59% in 2020 to just 17%.
On Thursday, a senior official in the Biden administration said the president had repeatedly raised concerns with Israel about violence by settlers.
The executive order sets out the groundwork for how the US will respond to further attacks in the West Bank, and is an escalation compared to the visa restrictions it imposed on some individuals last year.
"The situation in the West Bank - in particular high levels of extremist settler violence, forced displacement of people and villages, and property destruction - has reached intolerable levels and constitutes a serious threat to the peace, security and stability" of the region, Mr Biden said in a letter to Congress explaining his reasoning.
A senior administration official said the initial round of sanctions - targeting four people - were against "individuals that have directly perpetrated violence and those who have engaged in repeated acts of intimidation, property destruction, leading to the forced displacement of Palestinian communities".
They said one person initiated and led a riot that led to the death of a Palestinian civilian in the town of Huwara, while another had attacked people with stones and clubs.
They added that the executive order was "non-discriminatory" and applied to both Israelis and Palestinians who direct or take part in violent acts or threats against civilians, intimidation, destroying, seizing property or terrorism.
The US Treasury named the four sanctioned Israelis as David Chai Chasdai, 29; Yinon Levi 31; Einan Tanjil, 21; and Shalom Zicherman 32. Three of them lived in West Bank settlements and one lived near the occupied region's border, the Treasury said.
These US sanctions cannot be applied to American citizens, some of whom are thought to be involved in the violence.
State Department spokesman Matthew Miller said the US does believes the sanctions "will have an impact on these four individuals" and expects Israel to "do more to hold accountable those responsible for settler violence".
Shortly after Mr Biden signed the executive order, Israel signalled its dissatisfaction and described the majority of West Bank settlers as "law-abiding".
"Israel takes action against all law-breakers everywhere, and therefore there is no need for unusual measures on the issue," a statement from Prime Minister Benjamin Netanyahu's office said.
The response was yet another sign of a deepening public rift between the US and Israel.
The two leaders are long-term allies, but have disagreed in recent weeks about the idea of creating an independent Palestinian state. The US believes a Palestinian state alongside Israel - known as a "two-state solution" - is vital for long-term stability in the region.
Mr Netanyahu has repeatedly rejected the idea, and the White House acknowledged last month that the US and Israeli governments "clearly see things differently".
Those comments dampened hopes in some circles that the conflict could result in Israeli and Palestinian leaders restarting diplomatic negotiations and kickstarting the dormant peace process.