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US President Donald Trump has said Israeli settlements "complicate" the peace process with Palestinians and urged "care" over the issue.

He also told an Israeli newspaper that he did not believe the Palestinians, and possibly Israel as well, were ready to make peace.

President Trump angered Palestinians in December when he recognised Jerusalem as Israel's capital.

He also threatened to withhold aid unless Palestinians agreed to talks.

The US leader's latest comments came in .

Asked by editor-in-chief Boaz Bismouth when the US would present its peace plan, Mr Trump said: "We will see what happens. Right now the Palestinians are not into making peace, they are just not into it. Regarding Israel, I am not certain it, too, is interested in making peace so we will just need to wait and see what happens."

Asked whether Israeli settlements would form part of the peace plan, he said: "We will be talking about settlements. The settlements are something that very much complicates and always have complicated making peace, so I think Israel has to be very careful with the settlements."

More than 600,000 Jews live in about 140 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem. The settlements are considered illegal under international law, though Israel disputes this.

In excerpts of the interview published on Friday, Mr Trump said that recognising Jerusalem as Israel's capital had been a highlight of his first year in office.

"I think Jerusalem was a very big point and I think it was a very important point," he said.

"The capital, having Jerusalem be your great capital, was a very important thing to a lot of people. It was a very important pledge that I made and I fulfilled my pledge," he said.

Israel claims the whole of the city as its capital but the Palestinians want East Jerusalem, occupied by Israel in the 1967 Middle East war, to be the capital of a future Palestinian state.

Palestinian Authority President Mahmoud Abbas has said he will no longer accept the US as a mediator following the controversial recognition of Jerusalem.

Last month the UN expressed concern at a US decision to withhold more than half of a tranche of funding for an agency that supports Palestinian refugees.

Washington said it would hand over $60m (£43m) of a planned payment to the UN Relief and Works Agency (Unrwa), but would keep back $65m until it carries out "reforms".