The EU envoy to Israel expressed optimism Tuesday about US efforts to broker an Israeli-Palestinian peace deal and insisted the West had taken a tough line on Israeli settlement construction.

A steady flood of Israeli settlement announcements have threatened to derail negotiations relaunched in late July, but EU Ambassador to Israel Lars Faaborg-Andersen said there was still time for progress.

"There is reason to be more optimistic for a breakthrough this time around," he told AFP.

"We're not at crunch time yet."

US Secretary of State John Kerry is due back in the region Wednesday to meet both sides in a bid to breathe life into the talks, the latest attempt in a stumbling peace process first begun more than two decades ago.

Direct talks between Israeli and Palestinian negotiators have been jarred by three major settlement announcements, two of which were made in tandem with Israel's release of Palestinians jailed for attacks.

The third, which involved plans for a massive tranche of 24,000 new settler homes, was quickly rescinded after it sparked international outrage.

"It's a very unfortunate dynamic, the prisoner release and the settlement announcements," Faaborg-Andersen said, noting that both the European Union and the United States had sharply condemned the settlement plans.

He rejected the suggestion that the West was not taking a tough enough line on Israeli construction on land the Palestinians want for a future state.

"The international community is united on the issue of settlements, which is probably why the 24,000 tenders did not materialise," he said.

The parties agreed to nine months of negotiations, but the halfway point is rapidly approaching with little outward sign of progress.

But Faaborg-Andersen said the tenacious diplomacy of Kerry, who managed to cajole the two sides back to the negotiating table after a three-year hiatus, could yet surprise peace talk sceptics.

"This is not something we've seen in some time. He's a very, very strong partner of Israel, and of the Palestinian Authority," he said.

"They have a partner who is very, very committed and that augurs well for the process."