Majority-Muslim Kosovo agreed to recognise Israel and Serbia said it would move its embassy to Jerusalem from Tel Aviv.

Those decisions came out of a White House-brokered agreement between the two Balkan archrivals and announced by President Donald Trump Friday to normalise economic relations two decades after they fought a bitter war.

Israeli Prime Minister Benjamin Netanyahu said Serbia will become the first European country to transfer its embassy to Jerusalem, following Washington's ground-breaking recognition of Jerusalem as Israel's capital almost three years ago.

Kosovo will also set up its Israel mission in occupied Jerusalem and in exchange earn Israel's recognition, as it seeks to further legitimize its 2008 declaration of independence and statehood.

"I thank my friend the president of Serbia... for the decision to recognise Jerusalem as Israel's capital and to transfer his embassy there," Netanyahu said, saying the controversial move would happen by July 2021.

"I would like also to thank my friend President Trump for contributing to this achievement," he said in a statement.

It was the second big news out of Washington in a month for Israel on the diplomatic front.

In August the United States brokered a deal for the United Arab Emirates to normalise relations with Israel, symbolically marked on Monday by the first commercial air flight between the two countries.

The agreement, expected to be signed at a White House ceremony in coming weeks, would be Israel’s first with a Gulf nation, and the third with an Arab country after those it reached with its Egypt in 1979 and Jordan in 1994.

Election ploy? 

Palestinians reacted with cynicism about the Kosovo and Serbia announcements, suggesting they were more to bolster Trump’s reelection prospects in two months while victimising them.

"Palestine has become a victim of the electoral ambitions of President Trump, whose team would take any action, no matter how destructive for peace... to achieve his re-election” in November, tweeted Saeb Erekat, the secretary general of the Palestine Liberation Organisation (PLO).

"What else will Trump procure for Israel before November?” said senior Palestinian official Hanan Ashrawi.

But in Washington Trump senior adviser and son-in-law Jared Kushner, a key player in Middle East negotiations, said the moves advance peace and make Americans safer.

"Today’s breakthrough really is historic,” Kushner said at the White House.

"This is just another chapter that this administration has been able to write towards making the world a safer and more peaceful place,” he said.

Traditionally, most diplomatic missions in Israel have been in Tel Aviv as countries stayed neutral over the status of Jerusalem, holy to the three Abrahamic faiths, until its status could be settled in an Israeli-Palestinian peace deal.

Israel occupied East Jerusalem in 1967 and later annexed it in moves never recognised by the international community.

Israel considers the city its undivided capital, but Palestinians see the mostly Arab eastern part of Jerusalem, including the Old City with its holy sites, as the illegally occupied capital of their future state.

The United Nations and the European Union, Israel’s top economic partner, say the city’s final status must be negotiated between Israelis and Palestinians, and say that until then countries should not locate their embassies there.

But Trump smashed that taboo in December 2017 by recognising Jerusalem as Israel’s capital and shifting the US embassy from Tel Aviv to the city.

The decision triggered Palestinian outrage and a diplomatic shockwave. So far only Guatemala has followed in his footsteps, also opening up its diplomatic mission in the holy city in May 2018.