Olmert told Parliament's Foreign Affairs and Defense Committee Monday the status of Jerusalem was the top reason a peace deal would not be reached, a senior Israeli official told CNN.

Palestinian Authority President Mahmoud Abbas signed a joint agreement with Olmert in November, promising to make efforts to reach a settlement before the year's end, the report said.

Palestinian officials have said they want East Jerusalem to be a Palestinian state's capital, while Israeli officials say East Jerusalem belongs to its capital.

Olmert also said Monday Israeli and Palestinian officials were nearing a deal on other "core" concerns, including border control and refugee issues.