A Jerusalem-based think tank has warned that Israeli settlement expansion is increasingly pushing away non-Orthodox and progressive American Jews from supporting the country.

The Jewish People Policy Institute's Annual Assessment of the Situation and Dynamics of the Jewish People was presented yesterday to the Israeli cabinet, according to the Haaretz news service.

The report found that "younger and more progressive Jews, especially in the Democratic Party, are being influenced by what they define as objectionable Israeli policies".

It said that as the Palestinian cause was gaining more sympathy among this category and Israel was showing little sign of wanting to promote a two-state solution, the trend "may continue to worsen".

However, it also said that that American-Jewish engagement with Israel was at an all-time high, based on the number of visitors to the country and on the number of participants in the Taglit-Birthright programme, which brings young adults on free 10-day trips to Israel.

The report also points to changes within Israel itself and says that its increasing conservatism could distance it from its traditional support base in the US: "The more liberal, Reform, Reconstructionist, Conservative and secular parts of the American Jewish community may become more distant as Israel demographically becomes more Orthodox and nationalistic."

It notes Israel's diplomatic isolation and criticises it for doing nothing to improve the situation of Palestinians. It also warns of the increasing power of the international Boycott, Divestment and Sanctions movement because of the expansion of the settlements on Palestinian territory: "So long as Israel's settlement activity does not appear consistent with a two-state outcome, Israel will find it difficult to blunt the de-legitimization movement – and this is a factor in the new geopolitical reality. It is also affecting at least part of the triangular relationship of Washington-Jerusalem-American Jewry."