After Trump's election, Israel's right wing was nearly giddy with expectations of better days to come, hailing Trump as a savior of Greater Israel who would not only get tough with Iran, Israel's nemesis, but also would quickly move the U.S. Embassy from Tel Aviv to Jerusalem and green-light a building boom for Jewish settlements in the West Bank.
Trump's campaign platform made no mention of a Palestinian state, departing from two decades of American policy, his designated ambassador to Israel is a settler ally, and a delegation of settler leaders was invited to his inauguration.
The White House did not comment on the new law.
"We want to formally apologize to you, Prime Minister Netanyahu, and the citizens of Israel for the shameful actions of the Obama Administration and his State Department that have jeopardized the security of Israel and betrayed its trust", the letter read.
He appeared to rally behind the Netanyahu administration to an extent that despite nearly unanimous worldwide condemnation, the Jewish state has announced three separate settlement plans to add thousands of illegal housing units in occupied West Bank since Trump was sworn in.
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"They [settlements] don't help the process, I can say that", Mr. Trump said.
On Friday, Trump told an Israeli newspaper that "going forward with settlements" is not a "good thing for peace", a position that puts him far closer to traditional USA policy, and to Obama, than before.
While the Trump administration did not consider settlements an obstacle to peace, it said, "The construction of new settlements or the expansion of existing settlements beyond their current borders may not be helpful in achieving that goal".
"We are looking at that, and we are looking at some other options we'll see".
Netanyahu's governing coalition is dominated by West Bank settlers and their political allies.
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Now Trump is adopting a more measured stance.
White House spokesman Sean Spicer said Tuesday that it "will be obviously a topic of discussion" when President Donald Trump and Israeli Prime Minister Benjamin Netanyahu meet later this month.
"I have known Trump for years but we are meeting in our official capacities for the first time", he said, adding that while Trump may be more accommodating to Israel than Obama, "that doesn't mean that there won't be restrictions".
The chairman of the Jewish Home party said that a "historic opportunity will be missed" if Netanyahu calls for the establishment of a Palestinian state during his upcoming meeting with Trump. While it may have some domestic political or cultural appeal, from the standpoint of USA interests, the peace process, and regional stability, moving the embassy would come at an exceptionally high cost with little or no benefit. Netanyahu has said the deal won't stop Iran from gaining nuclear weapons' capability, which he views as a threat to Israel's existence.
Jerusalem has been the capital of the Jewish people for more than 3,000 years.
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"Well, I think we are going to have a better relationship", Trump told Yosrael Hayom.