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Controversial US diplomat David Friedman declared to the group, made up of some 100 influential figures, that settlers in the West Bank, "are not going anywhere… and significant evacuation could result in a civil war. This is my opinion," in remarks quoted by three attendees during a supposed off-the-record meeting held in Jerusalem.

In the same speech, Friedman discredited any move toward a two-state solution - which he has previously labelled "a distraction" - saying that: "The argument that a peace agreement is needed to preserve Israel as a Jewish and democratic state is a platitude.

"People have been saying for 25 years that the situation [in the territories] cannot continue, but what has happened in those years? Israel has only grown and prospered," Friedman said in remarks reported by The Jerusalem Post.

In reference to US President Donald Trump’s so-called "deal of the century" peace agreement for the region, Friedman said, "We don't want to raise the expectations too much regarding the chance of achieving peace. We are realistic. We want a peace deal, but know it won't eliminate Hizballah or Islamic State."

The diplomat also launched a scathing attack on the Palestinian leadership, saying leaders "haven't shown they are capable of building institutions making it possible to live peacefully with their neighbours," according to The Jerusalem Post. 

"We must look at the relationship between Israel and the Palestinians not as a marriage, but as a divorce," Friedman said, without acknowledging any hindrance to the peace process on the American side.

The diplomat reportedly also mentioned to the group that the US embassy would relocate to Jerusalem by the end of 2019.

US embassy refuted Friedman's remarks saying they had been taking out of context.

The ambassador, who was a controversial choice for the diplomatic posting, is no stranger to making controversial remarks on Israeli occupation of the West Bank, having been closely tied to the settlement movement before he assumed his current role.

The diplomat regularly takes opportunities to blame the Palestinians for failure of peace efforts, while endorsing policies on settlement expansion, widely seen as a major obstacle to peace in the region.

Friedman is a staunch supporter of Donald Trump and his decision to move the US embassy from Tel Aviv to Jerusalem, calling it "bold, courageous and really smart".