Any decision to break with the status quo is likely to prompt protests from US allies in the Middle East such as Saudi Arabia, Jordan and Egypt. Washington relies on those countries for help in fighting the Islamic State militant group, which the new US president has said is a priority.

The US Congress passed a law in 1995 describing Jerusalem as the capital of Israel and saying it should not be divided, but successive Republican and Democratic presidents have used their foreign policy powers to maintain the embassy in Tel Aviv and to back negotiations between Israel and the Palestinians on the status of Jerusalem.

In early December, then-President Barack Obama renewed the presidential waiver on an embassy move until the beginning of June. It is unclear whether Trump would be able to legally override it and go ahead with relocation of the embassy.

US diplomats say that, despite the US legislation, Washington's foreign policy is in practice broadly aligned with that of the United Nations and other major powers, which do not view Jerusalem as Israel's capital and do not recognize Israel's annexation of Arab East Jerusalem after its capture in the 1967 Middle East war.

Israel approved building permits on Sunday for hundreds of homes in three East Jerusalem settlements in expectation that Trump will row back on the previous administration's criticism of such projects.