The Wall Street Journal, citing unnamed sources, says Israel was spying on negotiations between the United States and Iran.

In trying to build a case against any potential deal with Iran, the newspaper says Israel obtained confidential information from US briefings, informants and diplomatic contacts in Europe—then shared that intelligence with U.S lawmakers.

One senior US official told the paper that it's one thing for the US and Israel to spy on each other, but it's another for Israel to steal US secrets and play them back to American legislators to undermine US diplomacy.

The US says it learned about the Israeli spying activities by America's own spies, who intercepted some Israeli messages.

Israel denies that it was spying, saying it got the information on the Iran talks in other ways—such as watching Iran's leaders, and speaking with European officials about the Iran talks.

"These accusations are baseless and we reject them outright," Israeli Strategic Affairs Minister Yuval Steinitz told Channel 2 News Online.

"Israel does not spy on its allies and especially not on the United States," Steinitz continued. "The purpose of these statements is to harm the excellent cooperation that we have with the United States, despite the disagreements on the Iranian issue." (Photo: AFP/via Daily Mail)

This latest spat between the two countries comes as the White House continues to criticize Prime Minister Benjamin Netanyahu for comments he made about a Palestinian state toward the end of Israel's election campaign.

On Monday, Obama's top adviser questioned the Israeli leader's sincerity while addressing a left-wing Jewish group.

"Such contradictory comments call into question his commitment to a two-state solution." White House Chief of Staff Denis McDonough said.

Netanyahu later said he wants a two-state solution but under the right conditions. But the White House has kept up its criticism.

McDonough also warned that Israel's so-called occupation of "Palestinian" land must end.

"An occupation that has lasted for almost 50 years must end and the Palestinian people must have the right to live and govern themselves in their own sovereign state," McDonough said, drawing thunderous applause from the crowd.

Sen. Lindsey Graham, R-SC, slammed McDonough's speech saying, "The language used by the chief of staff of the president of the United States is exactly what Hamas uses."

Sen. John McCain, R-AZ, also weighed in, calling President Barack Obama to put aside his personal issues with the Israeli prime minister.

"The president should get over it. Get over your temper tantrum, Mr. President!" he said. It's time that we work together with our Israeli friends and try to stem this tide of ISIS and Iranian movement throughout the region, which is threatening the very fabric of the region."

"The president has his priorities so screwed up that it's unbelievable!" he charged.

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