Sweden, a big donor country that has recognized Palestine as a state, warned Tuesday that any US decision to withdraw funds to the UN agency for Palestinians would be destabilizing for the Middle East.

Sweden's UN Ambassador Olof Skoog said he had raised his concerns with US Ambassador Nikki Haley following reports that the US administration had withheld $125 million in funds due on January 1 for the United Nations Relief and Works Agency for Palestinians.

"My concern is that as we talk about regional stability, withdrawing funding for UNRWA would be very negative, both in terms of humanitarian needs of over five million people but also of course it would be destabilizing for the region," Skoog told reporters at UN headquarters.

The Swedish ambassador said he did not rule out raising the issue at the Security Council, which is scheduled to hold its regular meeting on the Israeli-Palestinian conflict on January 25.

US President Donald Trump earlier this month threatened to cut US aid to the Palestinians, saying on Twitter that Washington gets "no appreciation or respect" from the Palestinians.

"We pay the Palestinians HUNDRED OF MILLIONS OF DOLLARS a year and get no appreciation or respect," Trump tweeted on January 2.

"With the Palestinians no longer willing to talk peace, why should we make any of these massive future payments to them?"

In Washington, a senior State Department official said Monday that "contrary to reports that we have halted funding to UNRWA, the decision is under review."

"There are still deliberations taking place, and we have missed no deadline," said the official, who spoke on condition of anonymity.

Sweden was the first EU country to recognize Palestine as a state in 2014 and is among the top 10 donors to UNRWA along with Britain, Germany, the European Union, Saudi Arabia and the United States.

Human Rights Watch director Kenneth Roth called the US move "vindictive" and a "bullying tactic," as he urged other governments to step in and fill the gap if the United States decides to definitely cut funding.

UNRWA provides services including schools and health clinics to 5.3 million refugees in the Palestinian territories, Jordan, Lebanon and Syria.

"It is vindictive for the US government to deprive the UN of money to feed and educate Palestinian children in order to blackmail the Palestinian Authority into rejoining Trump administration-led peace negotiations," Roth said in a statement.

US Vice President Mike Pence will travel to the Middle East next week, with stops scheduled in Egypt, Jordan and Israel.