The chairwoman of the Senate Intelligence Committee on Tuesday accused Israel of further undermining the prospect for peace with the Palestinians by announcing a plan to build more Jewish settlements in a sensitive area near Jerusalem. But she was a lonely voice among her Democratic and Republican colleagues, who either took Israel’s side or avoided the issue entirely.

“It’s an indication of Israel’s continuing to stick a thumb in the eye of the Palestinians,” California Democrat Dianne Feinstein said of Israel’s plan to build thousands of Jewish housing units in Arab East Jerusalem, including an area called E-1, which would complete the Jewish encirclement of the city. “I am profoundly disappointed.”

Asked whether Israel’s action diminished the chances of a two-state solution to the Israeli-Palestinian conflict, she said, “Yes, absolutely.”

Feinstein’s reaction was more forceful than that of the Obama administration, which repeated its long-standing opposition to Israeli settlement in occupied territory. The State Department said the Israeli move complicated efforts to resume direct peace negotiations between Israel and the Palestinians and risked prejudging the outcome of any such talks by creating indelible facts on the ground.

“This includes building in the E-1 area, as this area is particularly sensitive and construction there would be especially damaging to efforts to achieve a two-state solution,” State Department spokesman Mark Toner said in a Dec. 3 statement.

Israel announced its settlement plans in response to the Palestinian Authority’s successful effort last week to upgrade its observer status at the United Nations. The U.N. General Assembly voted overwhelmingly to make Palestine a non-member observer state — the same status enjoyed by the Vatican. Only the United States, Israel and seven other states voted against the move.

Israel’s West Bank settlements are considered illegal under international law, which forbids an occupying power from moving parts of its population into conquered territory. Some 300,000 Israelis now live in the West Bank. Another 200,000 live in East Jerusalem, which Israel annexed after the 1967 Middle East war. The move was never recognized internationally.

The E-1 area is particularly sensitive because it would link Jerusalem with the large Jewish settlement of Ma’ale Adumim near the Jordan River Valley and cut off Jerusalem from the rest of the West Bank. Jewish settlement in E-1 also would effectively divide the West Bank in half, denying the Palestinians contiguous territory for their would-be state.

Feinstein also slammed Israel’s decision to punish the Palestinian Authority in the wake of the U.N. vote by withholding more than $100 million in taxes that it collects on Palestinian imports.

However, she was alone among her Senate colleagues in expressing such criticism.

Sen. Bob Casey, chairman of the Foreign Relations subcommittee that deals with the Middle East, as well as other lawmakers, said Israel’s colonizing moves in the West Bank were its own sovereign business.

“They’ve got to try to move forward in the way they think is best,” Casey said. He also called for a resumption of direct negotiations between Israel and the Palestinians “without preconditions.” That stipulation echoes Israel’s position on the resumption of negotiations, which would allow it to continue building settlements while peace talks are under way. The Palestinians have refused to return to negotiations without a halt to settlement construction, arguing Israel is taking the land where they hope to build their state.

Casey challenged those critics who warned the Israeli move would make it more difficult to resume peace talks.