JERUSALEM -- Israel is considering annexing major West Bank settlement blocs if the Palestinians unilaterally seek world recognition of a state, an Israeli official said yesterday -- moves that would deal a grave blow to prospects for negotiating a peace deal.

Israel has refrained from taking such a diplomatically explosive step for four decades. The fact that it is considering doing so reflects how seriously it is concerned by the Palestinian campaign to win international recognition of a state in the absence of peacemaking.

The Palestinians launched that campaign after peace talks foundered over Israeli construction in West Bank settlements. Yesterday, the Israeli Interior Ministry said it would decide next month whether to give final approval to build 1,500 apartments in two Jewish enclaves in east Jerusalem. Israel captured both east Jerusalem and the West Bank from Jordan in 1967.

Israel annexed east Jerusalem immediately afterward. But it carefully avoided annexing the West Bank, where 300,000 Jewish settlers now live among 2.5 million Palestinians.

Although it is widely assumed that under any peace deal Israel would hold on to major settlements it has built in 44 years, any decision to formally annex West Bank territory would be a precedent that could increase Israel's already considerable international isolation. The Palestinians claim all of the West Bank and east Jerusalem, in addition to the Gaza Strip, for a future state.

The government official who disclosed the possible annexation said he did not know how seriously authorities were considering the option. He said that "adopting unilateral measures is not a one-way street" and added that other options were also being considered.

These could include limiting water supplies beyond agreed-upon amounts and restricting Palestinian use of Israeli ports for business purposes, he said. Prime Minister Benjamin Netanyahu was aware of the moves being discussed, he added.

Nimr Hamad, an aide to Palestinian president Mahmoud Abbas, said, "These threats are not new . . . But we are continuing [our campaign] and are convinced our position is right."

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Too many rainy weekends? ... LI Works: Making Countertops ... LEGO at Old Westbury Gardens ... Previewing the Knicks in the NBA Finals ... Get the latest news and more great videos at NewsdayTV

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