AP Maale Adumim (West Bank)

Israel's far-right finance minister announced approval of contentious new settlement construction in the Israeli-occupied West Bank on Thursday, which Palestinians and rights groups worry will scuttle plans for a future Palestinian state by effectively cutting the West Bank into two separate parts.

The announcement comes as many countries, including Australia, Britain, France and Canada said they would recognise a Palestinian state in September. "This reality finally buries the idea of a Palestinian state, because there is nothing to recognise and no one to recognise," said Finance Minister Bezalel Smotrich during a ceremony on Thursday.

"Anyone in the world who tries today to recognise a Palestinian state - will receive an answer from us on the ground," he said. Prime Minister Benjamin Netanyahu did not publicly comment on the plan on Thursday, but he has touted it in the past.

Development in E1, an open tract of land east of Jerusalem, has been under consideration for more than two decades, but was frozen due to US pressure during previous administrations. On Thursday, Smotrich praised President Donald Trump and US ambassador to Israel Mike Huckabee as "true friends of Israel as we have never had before".

The E1 plan is expected to receive final approval on August 20, capping off 20 years of bureaucratic wrangling. The planning committee on August 6 rejected all of the petitions to stop the construction filed by rights groups and activists.