Palestinians are in a "state of shock" over a US Middle East peace plan, the head of the UN's agency for Palestinian refugees said Friday, voicing fears of a surge in violence. "We certainly have serious concerns that it will result in an escalation in clashes and in violence," said Christian Saunders, acting head of the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). His comments came after US President Donald Trump on Tuesday released the plan, which was seen as heavily biased towards Israel and angrily rejected by Palestinians. It recognises Israeli sovereignty over most of its West Bank settlements and the Jordan Valley, as well as an undivided Jerusalem. The plan also backs a Palestinian state with a capital on the outskirts of Jerusalem but says the Palestinian leadership must recognise Israel as a Jewish homeland and agree to a demilitarised state. Trump presented the long-awaited proposals alongside close ally Israeli Prime Minister Benjamin Netanyahu, who soon signalled he would seek to annex a large part of the West Bank. - 'Extremely unsettling' - "The plan that was released this week was extremely unsettling for the Palestine refugees living under occupation, under blockade and under conflict after conflict and crisis after crisis," Saunders told reporters in Geneva. "I think a lot of people, a lot of Palestinians, are in a state of shock... in a state of disbelief," he said. Saunders was in Geneva to launch an appeal to donors to fund UNRWA's 2020 budget to the tune of $1.4 billion towards essential services and assistance for 5.6 million Palestinian refugees across the Middle East. UNRWA has faced a severe funding crunch ever since Trump in 2018 decided to suspend, then yank entirely the US contribution to the agency's budget, robbing it of its top donor. Trump's administration, along with Israel, accuses UNRWA of perpetuating the Israeli-Palestinian conflict. The agency disputes that and says the services it provides would otherwise not be available to Palestinians. After the US withdrew funding, a range of other countries stepped up support and UNRWA actually entered 2019 with a surplus of about $60 million, Saunders said. "Unfortunately ... this initial support started to wane, and as a result we have been forced to carry over considerable liabilities into 2020," he said. "We are stretched to our limits." Saunders has temporarily taken the helm of UNRWA after Swiss national Pierre Krahenbuhl was ousted last year amid allegations of "serious ethical abuses" by the management. An internal UN probe found no "fraud or misappropriation of operational funds" by Krahenbuhl, but Saunders said the agency had taken criticism of mismanagement seriously. "Since then we have put the place in order," he said. At the same time, he lamented that UNRWA was facing a concerted campaign of misinformation by critics trying to convince parliamentarians in Europe especially not to fund the agency. The agency was set up in the years after more than 700,000 Palestinians were expelled or fled their lands during the 1948 war surrounding the creation of Israel. It provides schooling and medical services to refugees in Jordan, Lebanon and Syria as well as the Palestinian territories, and employs around 30,000 people, mostly Palestinians.