JERUSALEM, April 20 (Reuters) - In a veiled warning to US President Barack Obama, Israel's foreign minister said on Tuesday that any move to impose a peace settlement between Israel and the Palestinians would lead to greater conflict.

Any attempt to force a solution on the parties without establishing the foundation of mutual trust will only deepen the conflict, Avigdor Lieberman told the assembled diplomatic core celebrating Israel's Independence Day.

Though he made no reference to the United States, the remark appeared to be a response to recent speculation in Washington that Obama may consider proposing a peace settlement in the absence of a negotiated deal between the Palestinians and Israel.

Lieberman, who leads a far-right, pro-settler party in the coalition of Prime Minister Benjamin Netanyahu, said that before negotiating a final settlement of the 62-year-old conflict, it would be necessary first to establish a new reality in which Israel enjoys security, the Palestinians greater prosperity and both sides more stability.

He also told the assembled ambassadors in the grounds of the presidential residence of Jerusalem that Israel would never give up its control of all of Jerusalem, a city at the heart of the conflict.

Many foreign powers support a negotiated settlement of the dispute over Jerusalem that would satisfy Palestinian aspirations to have the capital of their future state in East Jerusalem, which Israel seized in a war in 1967.