Washington, March 18 (DPA) US President Barack Obama Wednesday denied that Washington's relationship with close ally Israel was in crisis over the Jewish state's plans to build settler housing on land within East Jerusalem.

In footage aired Wednesday evening on US-based Fox News, an interviewer asked Obama if US-Israeli relations were in crisis over the issue. Obama immediately replied: 'No.'

'Israel is one of our closest allies,' he said, 'and we and the Israeli people have a special bond that's not going to go away.'

The announcement last week of plans to build 1,600 homes in Ramat Shlomo sparked a heated row with top US officials. The announcement of the intended construction was made last week, amid a visit to the region by Vice President Joe Biden and one day after envoy Mitchell announced the start of US-mediated indirect Israeli-Palestinian peace talks.

Obama said in the Wednesday interview that the housing plans were 'not helpful' to the US mediation effort to restart the peace process.

'Friends are going to disagree sometimes,' he said.

The location of the homes would be on West Bank land that is situated within the municipal boundaries of Jerusalem, as drawn up after Israel captured East Jerusalem in the 1967 war.

Secretary of State Hillary Clinton and other officials have sought this week to soften the tone of the row, while still opposing the new construction.