The State Department on Thursday brushed aside any suggestions that the United States is contemplating financial or economic pressure against Israel to prevent it from building settlements. 

Spokesman P.J. Crowley told reporters that there had been a "misinterpretation" of remarks made by deputy spokesman Robert Wood earlier this week. 

Wood said reports of such action were "premature," setting off alarm bells among the Israeli media that the U.S. is considering that option. 

"We are not contemplating such action," Crowley said. "Clearly, this is why George Mitchell is in the region today talking to all of the parties that we believe what they need to do is to set conditions, to resume negotiations so that all of these issues can be resolved through peaceful negotiations."

Mitchell will visit Israel and the Palestinian territories Sunday and Monday, following a weekend stop in Damascus where he will meet Syria's Foreign Minister Walid Moualem, Mitchell's second visit to Syria since being appointed special Mideast peace envoy.

Turkey has also said it is prepared to resume mediating peace talks between Syria and Israel but Crowley would not comment directly on the prospect of the talks re-starting. 

"We're trying to see what Syria's prepared to do, you know, to move toward a comprehensive process. We're also trying to develop bilateral issues that we have with the Syrians, as well."

In Israel, Mitchell will meet with Israeli Prime Minister Benjamin Netanyahu

Netanyahu has so far said he is ready to pursue a peace process but Israel will only accept a demilitarized Palestinian state. Washington and Israel are also deadlocked over where to draw the line on a freeze of Israeli settlements. Washington wants to see an end to all settlement activity. In the meantime, it is also calling on Arab neighbors to show signals of recognition toward Israel.