REPUBLIKA.CO.ID, JERUSALEM - The smell of fresh paint wafts through the domed lobby of the latest Israeli arrival in East Jerusalem -a Jewish seminary in a bustling commercial area in the same building as a post office serving thousands of Palestinians every day.

Otzmat Yerushalayim, which includes sleeping quarters and could house as many as 300 young Israelis, is the first Jewish housing venture on Saladin Street, a main shopping thoroughfare across from the walled Old City.

Palestinians and Israeli critics worry the placement of the academy in such a central location is asking for trouble in East Jerusalem, which has stayed largely trouble-free in recent years compared to the Gaza Strip and occupied West Bank, and which Palestinians hope will be the capital of a future state.

"Tensions are sure to spike here. It isn't going to be easy," a Palestinian pharmacist, who gave her name only as Maral, said in a drugstore across the street.

"They will just close us up the second a confrontation arises and all work will grind to a halt," she said.

Israel's annexation of East Jerusalem after its capture in a 1967 war has never been recognized, meaning most of the world views Israeli enclaves there as illegal settlements.

Settlement expansion has been a key sticking point in Israeli-Palestinian peace talks, which collapsed in April. But even when Israel froze construction temporarily in 2010, it always insisted the moratorium exclude East Jerusalem, which it views as an integral part of the country.

Unlike in the occupied territories, most Palestinians in East Jerusalem enjoy Israeli social benefits and looser travel restrictions, making them less motivated to engage in political protests.

Religious fervor runs deep in the holy city, however, and violence flared during the Jewish Passover holiday when Palestinians, gathered at a holy site revered by Muslims and Jews, threw rocks and firecrackers to try to prevent any attempt by ultranationalist Jews to pray there.

Israeli riot police used stun grenades to quell the protests at a plaza that overlooks Judaism's Western Wall and is home to al-Aqsa mosque, Islam's third holiest site. Jews refer to the area as the Temple Mount, the site of the two biblical Jewish temples.

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