* Clinton also meets foreign ministers of Egypt, Jordan
* Meeting with Obama set for Thursday
* West Bank shooting casts cloud over talks (Adds Netanyahu, Clinton comments)
By Andrew Quinn and Jeffrey Heller
WASHINGTON, Aug 31 (Reuters) - U.S. Secretary of State Hillary Clinton met Israeli and Palestinian leaders on Tuesday ahead of Thursday’s direct peace negotiations as new violence flared over Jewish settlements in the occupied West Bank.
Clinton met Palestinian President Mahmoud Abbas and also saw Israeli Prime Minister Benjamin Netanyahu, whose arrival followed news that four Israeli settlers were shot dead in an attack that the Islamist Palestinian group Hamas said was an assault on the peace process.
"This kind of savage brutality has no place in any country under any circumstances," Clinton told reporters at the start of her meeting with Netanyahu.
"The forces of terror and destruction cannot be allowed to continue. It is one of the reasons why the prime minister is here today, to engage in direct negotiations with those Palestinians who have rejected a path of violence in favor of a path of peace."
Netanyahu said he would insist in the face-to-face talks with Abbas that security arrangements in any final peace deal would enable Israel "to confront this kind of terror and other threats."
The Israeli leader has said he would support the creation of a Palestinian state in the West Bank, where Abbas’ Palestinian Authority holds sway, and in the Gaza Strip, under Hamas control since 2007, but only if it was demilitarized.
The peace talks themselves, resuming on Thursday for the first time in 20 months, could face an early stumbling block -- the end on Sept. 26 of a 10-month Israeli moratorium on new housing construction in West Bank settlements.
Netanyahu has not given any definitive word on what will happen after the freeze expires. Abbas has threatened to quit the talks if building resumes on land Israel captured in a 1967 war.
"We will not let terror decide where Israelis live or the configuration of our final borders. These and other issues will be determined in negotiations for peace that we are conducting," Netanyahu said with Clinton at his side.
U.S. President Barack Obama is due to hold White House meetings and host a dinner on Wednesday with Netanyahu and Abbas as well as Jordan’s King Abdullah and Egyptian President Hosni Mubarak, expanding the dialogue to two influential Arab neighbors that already have peace deals with Israel.
Netanyahu and Abbas are then expected to begin direct negotiations at the State Department on Thursday, relaunching the peace process amid widespread skepticism about the prospects for success.
The Washington talks represent Obama’s riskiest foray into Israeli-Palestinian peacemaking -- a goal that has eluded other U.S. presidents -- and Tuesday’s West Bank attack underscored the challenges ahead.
WHITE HOUSE CONDEMNATION
The four Israeli settlers, two men and two women, one pregnant, were shot dead after nightfall on busy Highway 60 close to the flashpoint West Bank city of Hebron, a road used by Palestinians and Israeli settlers alike.
The White House strongly condemned the attack and urged that it not be allowed to derail the negotiations.
"It is crucial that the parties persevere, keep moving forward even through difficult times, and continue working to achieve a just and lasting peace in the region that provides security for all peoples," it said in a statement.
Hamas Islamists in the Gaza Strip, a group that opposes any dialogue with the Jewish state and is not taking part in the Washington talks, issued a statement claiming responsibility for the attack and threatening more.
The United States and its allies have urged all parties to refrain from any action that could disrupt the talks. An official with Abbas’s Fatah party said the attack ran against their own hopes for peace.
"We are against the killing of civilians anywhere -- Palestinians or Israelis. And I hope this was not timed to make it even more difficult for us here," senior Fatah official Nabil Shaath told Reuters Television in Washington.
Netanyahu, who has pushed along with the United States for direct talks without preconditions, has said the future of settlements should be resolved in negotiations. Washington hopes these can resolve the main disputes within a year.
Many analysts view that goal as unrealistic, citing Israeli and Palestinian internal political divisions and the complexities of issues, including settlements and the fate of Jerusalem, that have defied solution over decades of conflict. (Additional reporting by Nadine Alfa in Washington; Editing by David Alexander and John O‘Callaghan)