The U.S. failure to persuade Israel to renew a limited freeze on construction in West Bank settlements was the latest setback for the Obama administration in its mission to reach a peace deal between the Israelis and the Palestinians. The goal of a Palestinian State, a top priority for the president, appears increasingly in doubt.

Palestinian Authority President Mahmoud Abbas expected the US to stop Israeli settlement building. But the U.S government’s inability to do so showed how little the American administration is able to pressure Israel when needed.‪

Repeatedly, the Palestinians said that if Israel snubs the US demand on settlement freeze it will make it difficult on the U.S to force Israel to compromise on more difficult issues during the negotiations.‪

So, what are the Palestinian’s options right now? ‪ ‪

Early this week Abbas hinted that he is ready to dissolve the Palestinian Authority and let the Israelis “as an occupying power” to deal with two and a half million Palestinians in the West Bank and another troubling million and a half in the Gaza Strip.

This kind of rhetoric was used in the past by some Palestinian officials as a desperate last move.‪ ‪

“I cannot accept, upon my honor, to remain the president of an authority that doesn’t exist, because practically and from an international perspective, we don’t exist,” Abbas said during an interview with a local Palestinian television station.  ‪

‪The dissolving of the Palestinian Authority will have severe consequences on Israel’s economy and is likely to become a recipe for the beginning of a new wave of violence. Palestinians say that the collapse will help organizations like Hamas and Hezbollah to gain more popularity as they advocate using arms instead of peaceful talks with Israel.‪

Palestinian Chief Negotiator is expected to meet the U.S Secretary of State in the coming 48 hours in Washington to discuss the new American plan to deal with the standoff. U.S official told Fox News that Clinton is planning a press conference on Friday to declare a new American initiative in the Middle East.

Palestinian officials told Fox News that in the absence of a peace deal, they are also considering several steps to deal with this issue such as taking the battle to the United Nations to seek an international recognition for a Palestinian State with East Jerusalem as the capital.

Argentina, Uruguay and Brazil have already sent letters to the Palestinian President offering to recognize a future state, but Palestinians admit that without a U.S. recognition; support from the rest of the world is largely academic.