U.S. President George W. Bush says he is encouraged by the steps taken by Israelis and Palestinians to move the peace process forward, but warns it is fragile and there are threats to further progress. He spoke after talks at the White House with Israeli Prime Minister Ariel Sharon.

The president said terrorism poses a grave threat to the peace process, but not the only one. He said that while encouraging steps have been taken by both sides, much more remains to be done. He said the Palestinians must confront militants who want to kill the peace process, and Israel must take action to improve the everyday lives of the Palestinian people and give them hope. "In our discussions, I encouraged the prime minister to take further steps to improve the daily conditions faced by Palestinians," he said.

Mr. Bush said he warned the Israeli leader to think long and hard before taking actions that could create misunderstandings or inflame old hatreds on the Palestinian side. "I also urged the prime minister to carefully consider all the consequences of Israel's actions as we move forward on the road to peace," he said.

One area of contention is Israel's decision to build a security fence in the West Bank. Prime Minister Sharon said he discussed the issue with President Bush, but stresses the project will go forward. "The security fence will continue to be built with every effort to minimize the infringement on the daily life of the Palestinian population," said the Israeli leader.

The Palestinian Authority strongly opposes the fence, and Prime Minister Mahmoud Abbas raised the matter during talks at the White House last Friday. At the time, Mr. Bush called the fence a problem, adding it is difficult to build confidence with a wall snaking through the West Bank.

After meeting with Mr. Sharon, the president characterized the issue by saying "the fence is a sensitive issue. I understand. The prime minister made it very clear to me it was a sensitive issue. And I promised him we would continue to discuss and to dialogue."

Bush said the United States remains committed to the security of Israel, making clear the ultimate answer does not lie in a fence but in a determined effort to disarm militants. "The most effective way to fight terror is to dismantle terrorist organizations. I fully recognize that. And we will continue to work with all parties in the region to do just that," he said.

Standing by the president in the White House Rose Garden, Prime Minister Sharon said the Israelis want to see a complete end to terror. He said he is grateful for the current period of calm in the region, but added the quiet could be shattered if Palestinian officials do not crackdown on militants.