U.S. Secretary of State Mike Pompeo’s announcement on November 18 that the Trump administration no longer considered Israeli settlements to be illegal was yet another step in its efforts to reset the terms of any future outcome to the Israeli-Palestinian conflict.

As it did when recognizing Jerusalem as Israel’s capital, cutting funding for the United Nations Relief and Works Agency (UNRWA), which cares for Palestinian refugees, and ending its reference to the West Bank and Gaza as “occupied territory,” the administration has again sided with Israel on contentious permanent status issues, deeply antagonizing Palestinians. As Trump said about the Jerusalem decision, the U.S. seeks to take these issues “off the table.”

The administration’s decision to reverse the U.S. legal position on settlements in place since 1978 was not widely expected at this time, but it should not come as a surprise. The decision was consistent with earlier steps by the Trump administration to reframe other permanent status issues such as Jerusalem and refugees in a manner favorable to Israel. The timing may be related to the government formation process in Israel, perhaps in the hopes of bolstering Prime Minister Benjamin Netanyahu’s efforts to hold onto power.

In any case the decision will certainly strengthen the standing of the settlement movement and right-wing politicians in Israel. Further expansion of settlements—particularly beyond the established settlement blocs—will significantly undermine the diminishing possibility of any territorial solution in the West Bank. Even worse would be Israeli annexation of all or parts of the West Bank, as endorsed by Netanyahu during the most recent election campaign. This would prove a fatal blow to any prospect of a two-state solution.

The Palestinians have reacted strongly to the Trump administration’s announcement. Relations between the Palestinians and the United States are already in tatters as a result of the administration’s previous steps, so the Palestinian response has focused on building support internationally for their position on the illegality of settlements. It is possible, however, that the Palestinians may respond further by cutting their only remaining bilateral ties with Washington that run through security channels.

At a broader level, the latest decision by the administration underscores the growing isolation of the United States at the international level on Israeli-Palestinian issues. Just days before Pompeo made his announcement, the European Court of Justice upheld European Union rules mandating that products made in Israeli settlements could not be sold in Europe if they were labeled as “products of Israel.” After Pompeo’s remarks, the EU issued a strong statement reiterating its longstanding position affirming the illegality of Israeli settlements in the occupied territories. The United Nations and others have issued similar statements.

The administration’s other steps to address permanent status issues have also met with widespread opposition internationally. After the U.S. cut all funding for UNRWA and sought to end the agency’s mandate, the General Assembly voted 170-2 on November 15 to extend the mandate until 2023. Only the United States and Israel voted against. Similarly, when the U.S. recognized Jerusalem as Israel’s capital and opened its embassy in the city, it was followed by only one other country, Guatemala.

The greatest danger arising from the administration’s reversal is probably not its impact on settlement activity per se, but rather that it might give further impetus to the right-wing drive in Israel to annex all or part of the West Bank. American policy on settlements is subject to change, but annexation would be an irrevocable legal step by Israel that would doom prospects for a two-state solution, the only possible framework to settle the Israeli-Palestinian conflict that can conceivably be agreed between the two sides.

Absent such a solution, Israel and the Palestinians would be doomed to live together in a binational state. Israel would then have to choose between its democratic values and it Jewish character, while Palestinians would be unable to achieve their national aspirations.

The change in the U.S. position on settlements may indicate that the administration still hasn’t given up on its “Deal of the Century,” which has been on hold for most of the year due to the inability of Israeli politicians to form a new government. It is hard to see what the administration hopes to accomplish by publishing its plan after it has so thoroughly alienated the Palestinians. But if it proceeds, it would be further evidence that its real aim is not to promote peace but to undo permanently any chance of a two-state solution.

There is now a long list of new U.S. positions toward Israeli-Palestinian issues that a future administration would have to address before it could reengage as a serious sponsor of Middle East peace efforts. The list now includes positions on Jerusalem, settlements, and refugees, a tall order for any future administration to manage. The current administration’s actions in the coming year will determine whether the damage done is reversible or not.

To be precise, if the Israeli government moves forward with annexation and the Trump administration backs this, the consequences will be irreparable. At that point, Israel and the Palestinians would be locked into a binational future and there would be nothing a new administration or the rest of the international community could do to save the parties from their unfortunate fate.