Europe's top diplomatcalled for a Palestinian state sharing Jerusalem as its capital with Israel as Palestinian president Mahmud Abbas' Fatah movement yesterday cancelled this week's Gaza ceremonies marking the 10th anniversary of Yasser Arafat's death due to security concerns.

"I think Jerusalem can be and should be the capital of two states," the new EU foreign policy chief Federica Mogherini told reporters in the Israeli-occupied West Bank city of Ramallah.

The status of Jerusalem is a sensitive issue that has blocked peace efforts for decades.

Palestinians are seeking to achieve statehood in Gaza and the West Bank with annexed east Jerusalem as their capital. Israel claims Jerusalem as its undivided and eternal capital city.

In recent weeks tensions have soared, with Israel pushing plans to build new Jewish settlements in east Jerusalem and Jewish extremists demanding the right to pray at the flashpoint Al-Aqsa mosque compound.

Israeli Defence Minister Moshe Yaalon reiterated on Saturday that Jews -- who are allowed only to visit the compound holy to both Jews and Muslims -- would not be authorised to pray there.

Palestinian president Mahmud Abbas urged Mogherini to ensure that this would never happen and that the status quo would remain unchanged, to avoid mass unrest being unleashed.

Since starting her first official visit to Israel and the Palestinian territories on Friday, Mogherini has been pushing for ways of reviving the peace process frozen since April.

Meanwhile, Gaza-based Fatah spokesman Fayez Abu Eita told AFP that Hamas said it could not guarantee security at the memorial events scheduled for Tuesday.

"We were informed by the security and political wings of Hamas that they were unable to guarantee the safety of the festival," he said. "Faced with the danger posed to the public, we were obliged to announce its cancellation."

The Fatah announcement comes after at least 10 explosions hit houses and cars belonging to senior Fatah members in Gaza on Friday, reportedly without causing any casualties.