The mistrust between Israel and the Palestinians is higher than ever, US Secretary of State John Kerry said on Wednesday at a hearing into the 2015 State Department budget request.
Kerry was however optimistic about coming to "some kind of understanding of the road forward" for reaching a framework agreement between the two sides.
The secretary of state admitted that while there are still major issues in the progress of the negotiations, such issues are part of the bigger picture.
"You have to see those gaps in the context of the negotiations," he said. "I do believe both parties are serious and want to find a way forward."
Kerry said that despite this, neither side believes the other is serious and that the level of mistrust between the two sides is higher than ever.
On whether or not reaching an agreement was still an option, Kerry told the US lawmakers "I still believe its possible... but difficult."
Israel and the Palestinians are keying up for a major battle over the coming weeks regarding whether Israeli Arabs will be included in the next security prisoner release later this month.
Palestinian officials have said in recent days that they expect Israel to release Israeli Arabs in the final batch of 26 prisoners, who are set to go free on March 28. Foreign Minister Avigdor Liberman, however, made clear that all five Yisrael Beytenu cabinet ministers would vote against releasing Israelis convicted of terrorism if the idea came to the cabinet for a vote.
Under the framework agreement from last July that led to the current Israeli-Palestinian negotiations, Israel was to release 104 convicted terrorists in four stages. Israel has already released 78 prisoners, with one tranche left to go.
Michael Wilner contributed to this report.