U.S. President Barack Obama was poised on Wednesday to launch a new U.S. push for Middle East peace even as a flare-up of Hamas violence and a deadlock over Israeli settlements loomed as potential deal-breakers.

Preparing to host a Washington summit to restart direct Israeli-Palestinian negotiations, Obama also faced the challenge of overcoming deep scepticism about his chances of succeeding where so many of predecessors have failed.

Hamas militants declared war on the talks even before they began, killing four Jewish settlers in the occupied West Bank on Tuesday, threatening more attacks and underscoring the formidable obstacles to ending the decades-old conflict.

Palestinian leaders committed to the peace process joined Israel and the United States in condemning the attack and said the resumption of face-to-face Israeli-Palestinian negotiations, suspended for 20 months, would not be derailed.

This kind of savage brutality has no place in any country under any circumstances, U.S. Secretary of State Hillary Clinton told reporters in Washington as she met Israeli Prime Minister Benjamin Netanyahu for evening talks.

Obama will meet separately with Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas on Wednesday before hosting them for dinner, the warmup for formal talks on Thursday brokered by Clinton.

The summit marks Obama's riskiest plunge into Middle East diplomacy, not least because he is bringing the sides together to commit to forging a peace deal within 12 months. 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 the Israeli-Palestinian front could set back Obama's already-faltering outreach to the Muslim world as he seeks solidarity against nuclear-defiant Iran.

STARK REMINDER

The Hamas attack cast a shadow over the summit's opening, carrying a stark reminder that the Islamist group, which controls Gaza and opposes dialogue with Israel, remains a threat to peace moves by its moderate Palestinian brethren. It warned that Tuesday's killings were just the first phase.

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.

Netanyahu said he would insist in the talks with Abbas that security arrangements in any final peace deal would enable Israel to confront this kind of terror and other threats.

We will not let terror decide where Israelis live or the configuration of our final borders. These and other issues will be determined in negotiations for peace that we are conducting, Netanyahu said.

The four Israeli settlers, two men and two women, one pregnant, were shot dead after nightfall on a busy highway close to the flashpoint West Bank city of Hebron.

The White House strongly condemned the attack and urged that it not be allowed to sabotage the negotiations. It took months of U.S. pressure to bring the two sides to the table.

Abbas, who also met Clinton ahead of the summit, condemned any operation that targets civilians, Palestinians or Israelis. Hamas calls the Western-backed Abbas, who governs only in the West Bank, a traitor for talking to Israel.

Jewish settlers said the killings displayed the folly of trying to make peace with the Palestinians.

But Mark Regev, Netanyahu's spokesman, said, We are not looking for excuses not to move forward. We want to move forward in peace, and we hope that no one else is looking for excuses.

LONG-SHOT PEACE DEAL?

Still, many Israelis and Palestinians are deeply pessimistic about peace prospects.

Most analysts consider Obama's one-year timeframe for completion of a final accord to be a long shot, citing Israeli and Palestinian internal political divisions and the complexities of issues ranging from settlements to the fate of Jerusalem that have long defied solution.

But Obama's Middle East envoy George Mitchell insisted the goal was realistic, telling reporters that both sides needed to seize the window of opportunity.

Egyptian President Hosni Mubarak and Jordan's King Abdullah will meet Obama and attend the White House dinner, expanding the dialogue to two influential Arab neighbours who have made peace with Israel and could be instrumental to broader Arab reconciliation with the Jewish state.

Obama has raised the political stakes for himself domestically by putting his presidential prestige on the line ahead of pivotal congressional elections in November and his own re-election bid in 2012.

(Additional reporting by Jeffrey Heller and Andrew Quinn in Washington; Allyn Fisher-Ilan in Jerusalem, editing by Ralph Gowling and Anthony Boadle)

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