Israel will anger all Muslims if it does not resolve Jerusalem's disputed status, Egypt's president warned his Israeli counterpart on Sunday.

Egyptian President Hosni Mubarak emphasized to Israeli President Shimon Peres that the future of Jerusalem, which both Israelis and Palestinians claim as their capital, is an issue for the entire Islamic world.

"I expressed my concern to President Peres that peace talks have not progressed since our last meeting in July and that Egypt is looking forward to an Israeli response, such as halting the building of settlements in east Jerusalem," he said.

The Palestinians have refused to restart peace talks if there isn't a total halt in Israeli settlement building, something the Israel has not agreed to.

Mubarak added that the time had passed for talk on temporary solutions and borders — which has long been seen as a stepping stone to a solving the crisis — and instead a just and lasting peace should be concluded.

Egypt was the first Arab nation to conclude a peace deal Israel. While relations have never been warm, Egypt has been a key mediator in Israel's relations with the Palestinians, especially the militant group Hamas.

Relations between the countries have deteriorated in recent months, however, as Egypt has protested Israel's refusal to freeze its settlement building.

Peres, was in Cairo on Sunday to help repair ties and clear the way for a resumption of peace talks with the Palestinians.

Israel also on Saturday appointed a new ambassador to Egypt, longtime diplomat Itzhak Lebanon, the country's former envoy to the United Nations in Geneva.