The head of the Lebanese Shiite movement Hezbollah has warned that if there was war against Iran the whole Middle East region would "erupt", amid escalating US-Iranian tensions.

US President Donald "Trump, his administration, and his intelligence know well that  any war on Iran will not remain confined to Iran's borders", Hassan Nasrallah said. "Any war on Iran will mean the whole region will erupt," said the head of the Iran-backed movement in a televised speech on Friday.

"And any American forces and American interests will be permissible" as a target, he said.

Hezbollah is listed as a "terrorist group" by the United States, and has fought several wars with US ally Israel to the south of Lebanon.

Nasrallah on Friday also slammed a proposed US peace deal to end the Israeli-Palestinian conflict that Trump has dubbed "the deal of the century".

"It's a void deal... A historic crime," he said of the plan, that has already been rejected by the Palestinians as it is expected to largely favour Israel.

"This deal is a loss of Palestinian, Arab, and Islamic rights," Nasrallah said.

Thousands of Iranians joined annual rallies in support of the Palestinian cause on Friday, also rejecting the US peace plan.

Trump's son-in-law Jared Kushner has been drafting the long-awaited peace plan, the economic aspects of which are to be presented at a conference in Bahrain next month.

The United Nations earlier on Friday said it would not be taking part in that meeting on June 25 and 26 in Manama.

In December 2017, US President Donald Trump broke with decades of bipartisan policy to recognise Jerusalem as Israel's capital in a move that prompted the Palestinians to cut all contacts with his administration.

Israel insists the whole of Jerusalem is its "eternal, indivisible capital". The Palestinians demand the city's eastern sector as the capital of their long promised state.