Donald Trump has shattered decades of unwavering US neutrality on Jerusalem by declaring the sorely divided holy city as Israel’s capital.

The move sparked frustrated Palestinians to cry out that the US president had destroyed already-fragile Middle East hopes for peace.

Defying dire, worldwide warnings, Mr Trump insisted that after repeated peace failures it was time for a new approach, starting with what he said was his decision merely based on reality to recognise Jerusalem as the seat of Israel’s government.

He also said the United States would move its embassy from Tel Aviv to Jerusalem, although he set no timetable.

“We cannot solve our problems by making the same failed assumptions and repeating the same failed strategies of the past,” Mr Trump said, brushing aside the appeals for caution from around the world.

Harsh objections came from a wide array of presidents and prime ministers.

From the Middle East to Europe and beyond, leaders cautioned Mr Trump that any sudden change on an issue as sensitive as Jerusalem not only risks blowing up the new Arab-Israeli peace initiative led by Mr Trump’s son-in-law Jared Kushner, but could lead to new violence in the region.

(PA Graphics)(PA Graphics)

No government beyond Israel spoke up in praise of Mr Trump or suggested it would follow his lead.

Israelis and Palestinians reacted in starkly different terms.

Prime Minister Benjamin Netanyahu hailed Mr Trump’s announcement as an “important step towards peace”, and Israeli opposition leaders echoed his praise.

However, Palestinian President Mahmoud Abbas said Mr Trump’s shift serves extremist groups that want religious war and signals US withdrawal from being a peace mediator.

Protesters in Gaza burned American and Israeli flags.

Palestinian demonstrators burn representations of Israeli and American flags (Khalil Hamra/AP)Palestinian demonstrators burn representations of Israeli and American flags (Khalil Hamra/AP)

Mr Trump’s declaration of Jerusalem as Israel’s capital is a powerfully symbolic statement about a city that houses many of the world’s holiest sites.

He cited several: the Western Wall that surrounded the Jews’ ancient Temple, the Stations of the Cross that depict Jesus along his crucifixion path, and the Al-Aqsa Mosque where Muslims say their Prophet Muhammad ascended to heaven.

And there are major ramifications over who should control the territory.

The United States has never endorsed the Jewish state’s claim of sovereignty over any part of Jerusalem and has seen the city’s future as indelibly linked to the “deal of the century” between Israel and the Palestinians that Mr Trump believes he can reach.