Cutting funds from Israel wouldn't force it to make peace. It would actually cause it to get even more paranoiid and likely to launch wars to improve its strategic position while it has a military advantage. I repeat, cause Israel to believe that it will be at a military disadvantage in the future is the best way to cause a war now.
Man shot dead in northern Israel town of Bi'ina, police say the murder was gang related (Haaretz)
from the article: Obama has made Netanyahu an offer he can't refuse