The United States will withhold aid to the Palestinians if they do not sit down for peace talks with Israel, US President Donald Trump has warned.

Speaking after talks with Israel’s Prime Minister Benjamin Netanyahu in Davos on Thursday, Mr Trump said US aid to the Palestinians is “on the table” and they won't receive it “unless they sit down and negotiate peace”.

He also criticised the Palestinian leadership for refusing to meet Vice President Mike Pence during his tour of Middle East countries over the past week.

“When they disrespected us a week ago by not allowing our great Vice President to see them, and we give them hundreds of millions of dollars in aid and support, tremendous numbers, numbers that nobody understands – that money is on the table and that money is not going to them unless they sit down and negotiate peace,” Mr Trump said, according to Reuters.

His remarks came before Mr Netanyahu praised the president for his decision last month to recognise Jerusalem as Israel’s capital and relocate the US embassy from Tel Aviv.

“I want to say that this is a historic decision that will be forever etched in the hearts of our people, for generations to come,” the Israeli Prime Minister said.

“People say that this pushes peace backward - I say it pushes peace forward because it recognises history, it recognises the present reality and peace can only be built on the basis of truth.”

Mr Netanyahu also promised to back Mr Trump “all the way” if he decides to pull the United States out of a nuclear deal with Iran agreed by his predecessor Barack Obama.

However he did not make direct reference to Mr Trump's message to the Palestinians.