The US decision to end all funding for the UN agency for Palestinian refugees drew condemnation from the Palestinian leadership and its own allies on Saturday.
A spokesman for Palestinian President Mahmoud Abbas said the US move was "a flagrant assault against the Palestinian people” while senior PLO leader Hanan Ashrawi said it was “cruel and irresponsible” and would destabilise the region.
The US State Department announced the decision on Friday, saying the United Nations Relief and Works Agency (UNRWA) was an "irredeemably flawed operation".
"The administration has carefully reviewed the issue and determined that the United States will not make additional contributions to UNRWA," department spokeswoman Heather Nauert said.
The UNRWA provides services to more than 5 million Palestinian refugees in Jordan, Lebanon, Syria and the West Bank and Gaza. Most are descendants of people who fled Palestine in the 1948 war that led to the creation of the state of Israel.
“The Palestinian refugees are already the victims who have lost their homes, livelihoods and security as a result of the creation of the state of Israel,” Ms Ashrawi said in a statement released on behalf of the PLO executive committee. “Once again, they are being victimised by the US administration in support of Israel’s decades-long military occupation and impunity.
“The real outcome of the US administration’s latest unilateral and reckless policy is the destabilisation of the entire region and the creation of unimaginable suffering and hardship for the Palestinian refugees.”
The US decision on Friday is the second to deeply anger Palestinians under the Donald Trump government. Last December, Mr Trump announced US recognition of Jerusalem as Israel's capital, a reversal of long-standing policy that led the Palestinian leadership to reject Washington as a broker of Middle East peace.
“Such a punishment will not succeed to change the fact that the United States no longer has a role in the region and that it is not a part of the solution," Mr Abbas's spokesman, Nabil Abu Rdainah, told Reuters.
The UNRWA has faced a cash crisis since January when the US, its biggest single donor, paid out $60 million (Dh220m) but withheld another $65m. The agency, set up in 1949, runs Palestinian refugee camps and provides schooling and health services.
Minister of State for Foreign Affairs Dr Anwar Gargash said the US decision was “regrettable and complicates the file of the refugees with its humanitarian and political dimensions.
“We cannot but emphasise that the historic commitment of the UAE to support UNRWA and its humanitarian work continues," Dr Gargash wrote on Twitter.
Arab League Secretary General Ahmed Aboul Gheit said the US move was “complicating the problems in the Middle East and does not contribute to the stability of the region in any way”.
He said the UNRWA crisis would be at the top of the agenda at the next meeting of league foreign ministers in Cairo.
Jordan has already announced plans to organise a fund-raising conference on the sidelines of the UN General Assembly in New York next month.
The European Union said the US decision was "regrettable" and urged Washington to reconsider.
"The US has always played, and will continue to play, an essential role in any effort to achieve peace in the Middle East," an EU statement said. "The EU will continue to engage with the US and its other regional and international partners to work towards that common goal."
UNRWA spokesman Chris Gunness said the agency would try to make up its $217m shortfall.
"If not, some of the most marginalised and vulnerable people on the planet may well suffer," he told Agence France-Presse.
"People are going to become more desperate and marginalised," he said, warning of "dramatic, widespread, profound and unpredictable" consequences.
Ordinary Palestinians also voiced alarm at the US move. Mahmoud Mubarak, director of the community-run committees running the 19 refugee camps that accommodate about 500,000 Palestinians in the West Bank, warned of "very serious repercussions".
Representatives of the committees would be meeting on Tuesday to discuss their options, he told Agence France-Presse.
In the impoverished Gaza Strip, where most children attend UNRWA schools, Hisham Saqallah, 55, said the US move was "political blackmail" that would merely increase unrest.
"If they stop aid to schools, this means destroying the futures of a large number of students and throwing them into the street," he said.
"If they stop the aid completely it would have a major effect on our children."
Abu Mohammed Huweila, whose nine children have all attended UNRWA schools, called the US move "an unjust decision".
Before the US decision was announced on Friday, German Foreign Minister Heiko Maas said his country would increase its contributions to UNRWA because the funding crisis was fuelling uncertainty.
"The loss of this organisation could unleash an uncontrollable chain reaction," he said.