old and new diplomacy undermined by Israel

http://www.timesonline.co.uk/tol/news/world/middle_east/article7062807.ece

Today I came across an intereisting news in the Times (link above) about Israel expanding its settlements, building 1,600 homes in East Jerusalem, a district claimed by Palestinians for their future capital. Now, the odd point is not Israel further occupying Palestinian territories, it is doing so since 1948, the point I want to focus at is the fact that Israel is undermining its alliance with the USA. Israel is grown so powerfull that eventually it does not have to rely anymore on USA support; in fact it can be argued that Israel sought USA alliance because it is "a Jewish spot" in the Arab World and, as the past shows, there has been a tense climate between the Arab and the Jewish worlds in the Middle-East. However, as Giles Whittell, the autor of the article, said, "Mr Netanyahu has lost sight of the importance of US-Israeli relations and of the urgent need to build a coalition to isolate Iran before it threatens the region with nuclear weapons".
In this scenario, Israel is undermining its good and favorable relations with USA, its scarse relations with Palestine, worsening the Israel-Palestine issue, the mediatic role of the USA in the region, since Israel and Palestine agreed to negotiate only through the White House special envoy in the the Middle-East, Mr Mitchell, and is dismissing any chance to achieve a peace deal in the region.
Israel is following its line careless of the consequences probabibly because it is aware of its power.
It seems that in this situation diplomacy is a powerless tool; Israel decided not to rely neither on the multilater, new diplomacy, nor in the secret, old diplomacy, nor on the newest public diplomacy, it decided to run alone, and this will eventually pose a seriuos threat on the international sicurity for the foreseeable scenarios.