JERUSALEM – Israeli settlers have hauled construction equipment into a Jewish settlement deep inside the West Bank, officials said Saturday, preparing to break ground on a new housing project even as the U.S. raced to prevent peace talks from collapsing with the end of an Israeli moratorium on settlement building.

The end of the Israeli construction restrictions late Sunday presents the first major crisis in the new round of Mideast peace talks, launched earlier this month at the White House by President Obama.

Israeli Prime Minister Benjamin Netanyahu, who imposed the settlement slowdown 10 months ago as a peace gesture, says he will not extend the restrictions, despite public calls from Obama to do so. But the Palestinians, who oppose all Israeli construction on territories they claim for a future state, say they quit the talks if building resumes.

“Israel must choose between peace and the continuation of settlements,” Palestinian President Mahmoud Abbas said in an address to the United Nations General Assembly Saturday.

He said the Palestinians and the wider Middle East are continuously pushed into “the corner of violence and conflict” as a result of Israel’s “mentality of expansion and domination.”

With the clock ticking, U.S. Secretary of State Hillary Rodham Clinton was trying to broker a last-minute compromise before Sunday’s midnight deadline in hopes of averting a breakdown in talks.

Abbas and top Israeli officials, including the defense minister and Netanyahu’s chief negotiator, were all in the U.S. working on the issue. Clinton has urged both sides not to take provocative actions that could derail the negotiations.

Israel’s military chief last week warned that violence could erupt if peace talks break down – a concern that was underscored by rioting in east Jerusalem following the shooting death of a Palestinian man Wednesday.

Violence broke out again Saturday, as Israeli riot troops clashed with Palestinian protesters demonstrating against a settlement near the West Bank city of Hebron. An Associated Press photographer was briefly detained and roughed up by security forces and suffered a broken rib. The army claimed the photographer had refused calls to allow troops to operate.

As negotiations proceed in the U.S., there have been signs that both sides are willing to compromise.