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FILE PHOTO: Iran's Supreme Leader Ayatollah Ali Khamenei gestures before delivering a speech in Mashad, Iran, March 21, 2018. Leader.ir/Handout via REUTERS

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BEIRUT (Reuters) - Any move to negotiate with Israel would be an "unforgivable mistake", Iran's Supreme Leader Ayatollah Ali Khamenei said on Wednesday, after Saudi Arabia's crown prince said Israelis were entitled to live peacefully on their own land.

Saudi Arabia - birthplace of Islam and site of its holiest shrines - does not officially recognise Israel, but Mohammed bin Salman's comments, quoted in the U.S. magazine The Atlantic, are a further sign of an apparent thawing in bilateral ties.

They come as mainly Sunni Muslim Saudi Arabia faces off against Shi'ite Iran in a regional power struggle. Tehran and Riyadh back opposing sides in the conflicts in Yemen and Syria as well as rival political groups in Iraq and Lebanon.

"Movement toward negotiation with the cheating, lying and oppressive regime (of Israel) is a big, unforgivable mistake that will push back the victory of the people of Palestine," Khamenei said in a statement posted on his official website.

The statement, which did not explicitly name Saudi Arabia, said it was the duty of all Muslims to support Palestinian resistance movements and it pledged continued Iranian backing for the Palestinian Islamist group Hamas.

After the crown prince's comments, his father King Salman reiterated Saudi Arabia's support for a Palestinian state.

Riyadh has long maintained that normalising ties with Israel hinges on an Israeli withdrawal from Arab lands captured in the 1967 Middle East war - territory Palestinians seek for a future state.

However, Saudi Arabia opened its air space for the first time to a commercial flight to Israel last month, which an Israeli official hailed as historic following two years of efforts.

In November, an Israeli cabinet member disclosed covert contacts with Saudi Arabia, a rare acknowledgment of long-rumoured secret dealings which Riyadh still denies.

Khamenei issued Wednesday's statement in reply to a letter he recently received from Hamas chief Ismail Haniya which criticised the support of Arab governments in the region for the United States. 

Hamas, which is sworn to Israel's destruction, dominates the small coastal strip of Gaza, where this week at least 17 Palestinians were killed in clashes with Israeli security forces.

In his statement, Khamenei called on the people of Muslim countries to defeat Israel.

"With an intense and planned struggle they should force the enemy to retreat toward the point of demise," he said.

(Reporting By Babak Dehghanpisheh; Editing by Gareth Jones)

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Reuters