The increasingly tense dialogue between the US President, Barack Obama, and the new Israeli Prime Minister, Benjamin Netanyahu, has taken on all the trappings of a duel here.

Almost every day brings news of another sore point, blighting the once warm relationship between the two countries.

Anyone could be forgiven for thinking the most immediate threat to national security in Israel lay across the Atlantic. That Mr Obama uses almost every opportunity he gets to set the parameters of a final peace agreement between Israel and Palestine is bad enough.

But now officials in his administration are openly using Israeli anxiety at Iran's nuclear program as a bargaining chip to force its hand on giving up control of the West Bank Palestinian territory.

No less a figure than the White House chief-of-staff, Rahm Emanuel, was quoted this week laying down the law: if Israel wants US help to defuse the Iranian threat, then get ready to start evacuating settlements in the West Bank, he was reported to have told Jewish leaders in Washington.

This from a man whose father fought with a militant Zionist group, the Irgun, and whose appointment had provided such reassurance to Israeli officials.

Talkback radio blazed with fury across the country the same day as Israelis protested that no American official had the right to tell them where they could live. Then on Thursday came the news that Mr Netanyahu's planned first meeting with Mr Obama in Washington next month had been called off.

Mr Netanyahu had hoped to capitalise on his attendance at the annual American Israel Public Affairs Committee conference in Washington to visit the White House, but Administration officials informed his office that the President would not be "in town".

Sources in Washington added that the Administration would not be continuing the tradition that had developed during the Bush years of hosting Israeli prime ministers whenever they showed up in town, sometimes with just a phone call's notice.

Contrary to initial expectations, Mr Obama has wasted no time becoming fully engaged in the Middle East peace process, despite the magnitude of his domestic political agenda.

While Mr Netanyahu has refused to endorse the principle of a two-state solution to the Israel-Palestinian conflict agreed to by his predecessor, Mr Obama has made it abundantly clear that the US will accept nothing less than Israel living side by side with a sovereign Palestinian state.

Mr Obama is also demanding a freeze on all Jewish settlement expansion in the Israeli-occupied West Bank and has dropped the Bush administration's opposition to Hamas serving in a future Palestinian Authority government.

A prominent Israeli political commentator, Maya Bengal, who writes for the country's second largest selling newspaper Maariv, believes the holiday is over.

"As Passover comes to an end, so comes to an end, it seems, the days of grace granted to the Netanyahu Government by the American Administration," Bengal said.

A Tel Aviv barman, Meir Avraham, 30, recently returned after a trip to Australia, said he could feel the tensions being played out between the US and Israel on the street.

"If we lose America, then we are alone. So we must listen to what America wants," he said. "But really I think this is more about the little brother testing the limits of the big brother than a real conflict between Israel and the US."

An Israeli Foreign Ministry spokesman said: "We know Obama wants to change the relationship, make it seem less cosy but they also want to protect its special nature. We'll all still be friends."