Israel's Prime Minister Ehud Olmert says both Israeli and Palestinian leaders are seriously trying to reach a peace agreement.

After meeting with U.S. President George Bush for nearly three hours in Jerusalem, Mr. Olmert acknowledged the difficulties facing negotiations, saying that as long as there are militant threats from Hamas-controlled Gaza, it will be very hard to reach an understanding.

President Bush said both sides must make hard choices, but he said this is an historic opportunity for reaching a two-state solution.

Mr. Bush said Israel must dismantle settlement outposts and Palestinians must halt terrorist attacks.

Mr. Bush's visit Wednesday, was protested by at least 5,000 Hamas supporters in Gaza, who denounced U.S policies in the Middle East. Far right-wing Israeli groups also criticized Mr. Bush for being too conciliatory with Palestinians.

Mr. Bush travels to the West Bank Thursday for a separate meeting with Palestinian President Mahmoud Abbas.

President Bush later visits Kuwait, Bahrain, the United Arab Emirates, Saudi Arabia and Egypt.