The United States warned Thursday that Israel will see a "massive" negative impact if the Palestinian Authority collapses as Washington again pressed its ally to let revenue flow.

"We have made clear to the government of Israel in some very direct conversations that there is nothing that could be more counter to the strategic interests of Israel than the collapse of the Palestinian Authority," State Department spokesman Matthew Miller told reporters.

While acknowledging shortcomings in the Palestinian Authority, he said the Ramallah-based body had helped maintain stability in the West Bank even as war has raged in Gaza, run for years by rivals Hamas.

"If you saw the Palestinian Authority collapse and instability spread across the West Bank, it's not just a problem for the Palestinians," he said, "it is also a massive security threat for the state of Israel."

Under peace agreements in the 1990s, Israel collects money for the Palestinian Authority, which exercises limited autonomy in parts of the West Bank.

Israel then disburses the money to the PA.

But Israel has been blocking revenue since Hamas on October 7 carried out its massive attack in Israel, triggering a relentless retaliatory military campaign.

Israeli Finance Minister Bezalel Smotrich is a member of the far right who advocates Jewish settlement of the West Bank.

Prime Minister Benjamin Netanyahu is also a long-time critic of the Palestinian Authority and of moves toward an independent Palestinian state.

The World Bank recently warned that the Palestinian Authority's fiscal situation has "dramatically worsened" with the risk of complete collapse.