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By Lesley Wroughton AMMAN (Reuters) - U.S. Secretary of State John Kerry warned Israel on Thursday that it could face a third Palestinian uprising and deepening international isolation if American-brokered peace negotiations failed. Both Israelis and Palestinians have given grim assessments of the lack of progress in their talks, which the United States helped revive last July after a three-year hiatus. Violence has simmered and on Thursday, Israeli troops killed a Palestinian wielding a makeshift firearm in the occupied West Bank. Kerry, speaking in Jordan a day after a visit to Israel, where he appealed for limits on its settlement building in the West Bank, said the negotiations had made "significant progress" in some areas. He said it was important to keep aiming towards a full "final status" accord tackling issues at the core of the decades-old conflict, in contrast with more modest interim deals plagued by diplomatic deadlock and years of bloodshed. In an interview with Israel's Channel 2 television recorded in Jerusalem before he left for Amman, Kerry painted a bleak picture of what might lie ahead if peace is not achieved. "I mean, does Israel want a third Intifada?" he asked, referring to the danger of a new Palestinian uprising to follow those that erupted in 1987 and 2000. "If we do not find the way to find peace, there will be an increasing isolation of Israel, there will be an increasing campaign of delegitimisation of Israel that has been taking place on an international basis." MORE TALKS Kerry met Palestinian President Mahmoud Abbas in Amman later on Thursday before returning to Jerusalem for more talks with Israeli Prime Minister Benjamin Netanyahu on Friday. "Both Prime Minister Netanyahu and President Abbas reaffirmed their commitment to these negotiations despite the fact that at moments there are obviously tensions," Kerry said before those latest meetings. Friction over the talks has risen in the last week because of Israeli plans, announced in tandem with its release of 26 Palestinian prisoners, for some 3,500 new homes for Jewish settlers in the occupied West Bank and East Jerusalem. Palestinians have warned of a crisis if Israel continues to insist that they effectively agreed to turn a blind eye to the settlement expansion, in exchange for the progressive release of 104 long-serving inmates. Nine Palestinians have been shot dead by Israeli soldiers and three Israelis have been killed since peacemaking resumed. In the latest incident, a Palestinian chased a group of Israelis through a West Bank junction, launching hand-held fireworks at them, a Palestinian witness and the army said. Soldiers shot him dead. There were no Israeli casualties. After meeting Abbas on Wednesday in the West Bank city of Bethlehem, Kerry said Palestinians had never condoned settlements, which they and many countries view as illegal and the United States terms illegitimate. Palestinians fear the enclaves, built on land Israel captured in the 1967 Middle East war and which they seek for a future state, will deny them a viable country. Israel cites biblical and historical links to the territory. Kerry, whose shuttle diplomacy helped to revive the talks, has set a nine-month schedule for an agreement, despite widespread skepticism. "I remain absolutely committed to this ability to get a final status (agreement)," Kerry said at a news conference in Amman, repeatedly warning of "prolonged, continued conflict", violence and confrontation if the talks failed. Few details have emerged from the negotiations, held at unannounced times and at secret locations, in line with pledges to limit leaks. Abbas, in a speech on Monday, said that despite all the meetings nothing had changed on the ground. Netanyahu echoed his gloomy verdict on Wednesday, saying little progress had been made. (Additional reporting by Ali Sawafta in Ramallah and Dan Williams in Jerusalem; Writing by Dominic Evans and Jeffrey Heller; Editing by Barry Moody and Robin Pomeroy)