A key Palestinian official demanded Tuesday that President Barack Obama follow up his tough talk with Israeli Prime Minister Benjamin Netanyahu and force Israel to stop West Bank settlement construction and accept creation of a Palestinian state. Without action to reinforce Obama's words, Palestinian negotiator Saeb Erekat warned the whole region could deteriorate into extremism and instability. That message was echoed by Netanyahu's political rivals in Israel who called the meeting a failure and stressed that peace was impossible without establishing a Palestinian state. Israeli government officials downplayed the differences between Obama and Netanyahu, but the two disagreed publicly about the key issues in Mideast diplomacy _ how to deal with Iran, how to solve the Israeli-Palestinian conflict and the relationship between the two. Though the two professed friendship, the substance added up to the harshest public confrontation between an Israeli and American leader in nearly a decade, prompting Israeli commentators to warn of storm clouds on the horizon for the important relationship between the two countries. Despite US pressure, Netanyahu avoided committing to the idea of creating a Palestinian state and instead said the key to solving the Israeli-Palestinian conflict was to halt Iran's nuclear program – a sequencing disputed by Obama. The US president said progress toward Israeli-Palestinian peace would undercut extremists and help control Iran. He also said Israel must live up to its commitment under the internationally backed “road map” peace plan to freeze West Bank settlement construction. Erekat, who has been involved in various negotiation with Israel since 1991, welcomed Obama's remarks but said he must force Israel to act to “turn a new page for this region.” Failing to follow through “would mean closing the peace chapter and pushing the region into the hands of extremists,” Erekat said. Underlining the volatility in the region, Palestinian militants in the Gaza Strip fired a rocket at a house in the Israeli town of Sderot on Tuesday, causing extensive damage but no injuries. Several hours later, Israeli warplanes conducted four bombing runs on smuggling tunnels along the Gaza-Egypt border, said Palestinian security officials. Abbas swears in new government Palestinian President Mahmoud Abbas on Tuesday swore in a new government comprised mainly of members of his Fatah Party, but without representation of his bitter rivals from the militant Hamas group. The move underlines the failure of attempts to bridge differences between the two movements, which have been negotiating to form a joint government that would reunite the West Bank and Gaza and open the way for renewed foreign aid. Hamas overran Gaza nearly two years ago, expelling Fatah forces. The government sworn in Tuesday will effectively only rule the West Bank. In Gaza, Hamas official Mushir Al-Masri rejected the new Cabinet.