U.S. President Barack Obama urged Israel and the Palestinians on Wednesday ...

U.S. President Barack Obama waded into a new round of Middle East diplomacy on Wednesday, seeking momentum for revived peace talks clouded by a flareup of West Bank violence and a deadlock over Jewish settlements.

Obama met Israeli Prime Minister Benjamin Netanyahu as he launched a series of one-on-one meetings with Middle East leaders attending a U.S.-led peace summit that will culminate on Thursday with the first direct Israeli-Palestinian talks in 20 months.

With Obama's peace bid facing broad scepticism and the clock ticking towards the September 26 expiration of an Israeli settlement construction freeze, Israel's defence minister sounded a conciliatory note about the prospects for sharing Jerusalem, an issue at the heart of the decades-old conflict.

But big obstacles remain to Obama's quest for a peace deal that eluded so many of his predecessors.

Hamas militants declared war on the talks even before they began, killing four Jewish settlers in the occupied West Bank on Tuesday, vowing more attacks and underscoring the threat hardliners pose to the fragile peace process.

The summit marks Obama's riskiest plunge into Middle East diplomacy, not least because he wants the two sides to forge a deal within 12 months, a target many analysts call a long shot. He is staking precious political capital on the peace drive in a U.S. congressional election year.

There is also the danger that failure on this front could set back Obama's faltering attempts at winning over the Muslim world as he seeks solidarity against Iran.

JERUSALEM

In the prelude to face-to-face talks eventually expected to tackle volatile core issues that have long defied solution, Israeli Defence Minister Ehud Barack said the Jewish state would be willing to hand over parts of Jerusalem under a final peace accord.

There was reason to doubt, however, that Barak's rare comments about the need to partition Jerusalem -- as a junior member of Netanyahu's coalition government -- marked a softening of the rightist prime minister's long-stated refusal to divide the holy city.

West Jerusalem and 12 Jewish neighbourhoods that are home to 200,000 (Israeli) residents will be ours, Barak told the Haaretz newspaper.

The Arab neighbourhoods in which close to a quarter million Palestinians live will be theirs, he added, referring to East Jerusalem, which Israel captured from Jordan in a 1967 war and annexed as its it capital -- a status not recognized

abroad.

The Palestinians want a state in the occupied West Bank and the Gaza Strip, with its capital in East Jerusalem, whose Old City houses al-Aqsa, Islam's third-holiest shrine, along with the Western Wall, a vestige of Judaism's two ancient temples.

Commenting on Barak's remarks, a senior Israeli official travelling with Netanyahu said: Jerusalem is on the table at talks, but the prime minister's position is that Jerusalem must remain undivided.

SHOOTING ATTACK

Summit meetings went ahead in the aftermath of the West Bank shooting attack. Militants from the Palestinian Islamist group Hamas, which opposes peace with Israel, claimed responsibility. A pregnant woman was among the dead.

Palestinian leaders committed to the peace process joined Israel and the United States in condemning the attack, and vowed that the negotiations would not be derailed.

Abbas's security forces arrested 150 Hamas members in the West Bank after the attack.

The attack could make Netanyahu even less likely to accede to Palestinian demands to offer a further freeze in Jewish settlement-building on occupied land in the West Bank.

The peace talks themselves could face an early stumbling block -- the expiration on September 26 of a 10-month partial Israeli moratorium on new housing construction in settlements.

Netanyahu, who heads a government dominated by pro-settler parties like his own, has not given any definitive word on whether he will extend the freeze. Abbas has threatened to quit the talks if building resumes on land Israel captured in a 1967 war. Obama's aides have been scrambling for a compromise.

Obama and Netanyahu, who have had tense relations in the past, were photographed sitting side-by-side chatting in the Oval Office. Obama will also meet Palestinian President Mahmoud Abbas before hosting them for dinner, the warmup for formal talks on Thursday at the State Department.

Egyptian President Hosni Mubarak, who is attending the summit, said Israeli settlements were blocking the road to a peace deal with the Palestinians and Israel must extend its settlement moratorium. Writing in the New York Times, he also proposed an international force for the West Bank and said Egypt was ready to assist in mediation.

The Hamas attack was a reminder that the group, which rules Gaza, remains a threat to peacemaking by Abbas, whose secular Fatah party governs the West Bank. Hamas pledged more violence.

Netanyahu said he would insist in the talks with Abbas that security arrangements in any final peace deal would not expose Israel to attacks like Tuesday's roadside shootings.

(Additional reporting by Andrew Quinn in Washington; Allyn Fisher-Ilan in Jerusalem, editing by David Alexander)

Israel Egypt Barack obama The New York Times