Washington  - Israel and the Palestinians are nearing an agreement on resuming peace talks, the US State Department said Monday as Israeli Prime Minister Benjamin Netanyahu embarks on a three-day tour of key European capitals.

There is unlikely to be any announcement when Netanyahu meets with US envoy George Mitchell in London on Wednesday, but State Department spokesman Ian Kelly said he expected a deal to come in the near future.

"We're getting closer to an agreement," Kelly said, though he refused to offer any details. "I will say that we hope that this particular phase of the discussions ... will end very soon."

Peace talks between Israel and the Palestinians were suspended last year as Israel entered an election campaign, which resulted in in Netanyahu's right-wing coalition government replacing the centre- left administration headed by former premier Ehud Olmert.

Since taking office, Netanyahu has been at odds with US President Barack Obama's administration over settlement building in the West Bank. Obama has demanded a complete halt to construction, including so-called "natural growth" in existing Israeli settlements.

Kelly would not say whether a deal to resume peace talks included an Israeli commitment to freeze settlement activity, but he suggested there was no wiggle-room in the US demand.

"I think we've been very clear that "all" means stop all (settlement) construction," Kelly said.

Netanyahu will also meet with British Prime Minister Gordon Brown on Tuesday and German Chancellor Angela Merkel on Thursday. (dpa)