RAMALLAH, Palestinian Territories — US presidential hopeful Mitt Romney's endorsement of Jerusalem as the capital of Israel is "harmful" to US interests in the Middle East, a senior Palestinian official said on Sunday.

"Romney's declarations are harmful to American interests in our region, and they harm peace, security and stability," Palestinian negotiator Saeb Erakat told AFP.

"Even if this statement is within the US election campaign, it is unacceptable and we completely reject it. The US election campaign should never be at the expense of the Palestinians," he said.

"Romney is rewarding occupation, settlement and extremism in the region with such declarations."

At a speech in Jerusalem, Romney on Sunday hailed Jerusalem as Israel's capital, in an apparent endorsement of a position held by the Jewish state but never accepted by the international community.

"It is a deeply moving experience to be in Jerusalem, the capital of Israel," the Republican challenger said in a speech given on a rooftop overlooking Jerusalem's Old City in which he laid out key foreign policy issues facing Israel.

"East Jerusalem is occupied, and according to the two-state solution -- which is supported by the whole world, including by the United States and by the majority of Israeli people -- east Jerusalem is the capital of Palestine and west Jerusalem is the capital of Israel," Erakat said.

"You cannot have a two-state solution without east Jerusalem being the capital of Palestine," he said.

Israel, which occupied the largely Arab eastern sector during the 1967 Six-Day War and later annexed it, claims both halves of the city to be its "eternal and undivided capital."

But the Palestinians want the eastern sector as capital of their promised state and fiercely oppose any Israeli attempt to extend sovereignty there.

Most of the international community, including the United States, does not formally recognise Jerusalem as Israel's capital due to the ongoing conflict, insisting the issue can only be resolved through final status negotiations.

Photo AFP/POOL, Ronen Zvulun