The Aqaba agreement was born dead," read a headline in the largest Palestinian daily, Al-Quds, after footage on social media showed young settlers praying while they watched fires in near Palestinian village Hawara, just hours after two brothers from a nearby settlement were shot dead in their car there.
On Monday, another suspected Palestinian shooting attack in the West Bank critically wounded one person, emergency services said.
The events cast doubt on Netanyahu's ability to walk a diplomatic tightrope between Washington - pushing for a lasting compromise - and his own cabinet that includes hard-line settlers demanding tough action against Palestinian attacks.
Less than a month ago, U.S. Secretary of State Antony Blinken was in Jerusalem reaffirming U.S. support for a two-state solution: independence for the Palestinians in East Jerusalem, Gaza and the West Bank, which they say would be incompatible with Israeli settlements.
If Netanyahu now let violence spiral out of control it would be another, even bigger source of friction with the White House, said Amotz Asa-El, research fellow at the Shalom Hartman research institute.
"If anything like what happened last night resumes and gives Washington reason to suspect that Netanyahu is impotent in handling it, they will talk to him very plainly", said Asa-El, adding that the White House has put pressure Israeli leaders before.
"It's now in his interest to show that he is clamping down on this kind of settler violence."
The U.S. State Department spokesperson condemned both the killing of two Israelis and the settler rampage, in which one Palestinian was killed and more than 100 wounded. The spokesperson stressed "the imperative to immediately de-escalate tensions in words and deeds".
But shortly after a U.S. State Department joint communique said Israel had committed to stop approving new settlement units for four months, Netanyahu said that settlement construction would go on as planned.
"There is not and will not be any freeze," he tweeted in an apparent nod to his hard-line partners.
PRO-SETTLER PARTIES
Palestinians, alarmed since Israel's Nov. 1 election, when Netanyahu started building his coalition government with ultra-nationalist pro-settler parties Jewish Power and Religious Zionism, look to Washington to rein them in.
"The U.S administration, which fosters this government, must end all these crimes," said the spokesman for Palestinian President Mahmoud Abbas.
Itamar Ben-Gvir, the national security minister who heads Jewish Power, held a special faction meeting at a settler outpost slated for eviction because it was built without government permit.