Israelis and Palestinians have stepped up their rhetoric, with both sides insisting they want peace and blaming the other for lack of progress.
There are increasing signs the government of Prime Minister Ariel Sharon is making plans for possible unilateral action that will include removing some Jewish settlements from Palestinian land, annexing others, and drawing its own de facto borders to separate Israel from the Palestinians.
Mr. Sharon recently said lack of progress in peace talks with the Palestinians may force him to take unilateral steps. Indications are most of Mr. Sharon's right-wing Likud Party will support him in the effort. But other members of his coalition government have threatened to quit.
Within the past week, Deputy Prime Minister Ehud Olmert has also spoken of the need to dismantle many of the settlements and to draw boundaries to ensure a Jewish majority population inside Israel.
The Israeli daily newspaper, Yedioth Ahronot, reports that Mr. Sharon had told leaders of one of his coalition partners, the National Religious Party, that Jewish settlements would no longer exist in the Gaza Strip under any future final status agreement.
The idea of dismantling settlements and giving up land to the Palestinians represents a major shift for Mr. Sharon and Likud, which had been a strong proponent of expanding settlements and land claims.
There is increasing pressure on the government for its lack of progress in bringing about peace and security, sharp criticism from within the military establishment over its policy toward the Palestinians, and international and American criticism of its continued construction of a security barrier that dips far into Palestinian lands. Meanwhile, there is also a growing interest for some unofficial peace initiatives.
While Palestinians welcome an Israeli move to dismantle settlements, they do not want a unilateral plan imposed on them. Palestinian Prime Minister Ahmed Qureia has warned such action will not work and will only increase violence.
In an interview in Yedioth Ahronot, Mr. Qureia also said continued construction of the security barrier will kill chances for the internationally backed Road Map peace plan.
Israeli Foreign Minister Silvan Shalom is in Washington for talks with Secretary of State Colin Powell. At issue is how to get stalled peace talks moving again.
And while the diplomatic stalemate continues, so does at least some low level of daily violence. Seven Jewish worshipers have been shot and wounded near the Tomb of Joseph in the West Bank city of Nablus. And Palestinian sources said several Palestinians were injured in an exchange of gunfire with Israeli troops in Jenin.
On Thursday, six Palestinians were reported killed and more than a dozen injured in clashes with Israeli troops in the Rafah refugee camp in the Gaza Strip.