WASHINGTON - US President Barack Obama on Tuesday sounded a gloomy note about the prospect of a Palestinian state, warning that his policy difference with Israeli Prime Minister Benjamin Netanyahu "has great consequences for both countries and for the region."

"I took him at his word that that's what he meant," the president told reporters at the White House, referring to the premier's recent campaign pledge to reject a Palestinian state and build thousands more of settler homes in East Jerusalem.

Netanyahu's rhetoric has infuriated the Obama administration and further estranged their relations, though the Israeli leader has attempted, after re-election last week, to undo the damage by reaffirming his commitment to a two-state solution with strings attached.

Obama cautioned that even with the premier's "corrective", his conditions for the creation of a Palestinian state "would be impossible to meet any time soon."

With the possibility of "two states living side by side in peace and security" seeming "very dim," "that may trigger, then, reactions by the Palestinians that, in turn, elicit counter- reactions by the Israelis, and that could end up leading to a downward spiral of relations that will be dangerous for everybody and bad for everybody," Obama warned at a joint press conference with visiting Afghan President Ashraf Ghani.

The president pledged continued engagement with the Israelis and the Palestinians, as his administration is reevaluating its approach to the moribund peace process based on a two-state solution.

"But what we can't do is pretend that there's a possibility of something that's not there," he said. "And we can't continue to premise our public diplomacy based on something that everybody knows is not going to happen, at least in the next several years."

He reaffirmed, however, his administration's commitment to the two-state option, calling it "the best path forward for Israel's security, for Palestinian aspirations and for regional stability."

Obama and Netanyahu are known to have a rocky and uneasy relationship over the years, which has been strained further lately.

"There's a tendency I think in the reporting here to frame this somehow as a personal issue between myself and Prime Minister Netanyahu," the president observed.

"I have a very businesslike relationship with the prime minister," he remarked. "I've met with him more than any other world leader. I talk to him all the time. You know, he is representing his country's interests the way he thinks he needs to, and I'm doing the same."

"So the issue is not a matter of relations between leaders," he stressed. "The issue is a very clear, substantive challenge."

"Prime Minister Netanyahu has a different approach," said Obama. "And so, this can't be reduced to a matter of somehow let's all, you know, hold hands and sing Kumbaya. This is a matter of figuring out how do we get through a real naughty policy difference that has great consequences for both countries and for the region."