(Adds Palestinian quotes, Gaza violence) By Matt Spetalnick and Tabassum Zakaria JERUSALEM, Jan 9 (Reuters) - Embarking on his first visit to Jerusalem as U.S. president, George W. Bush pressed Israeli and Palestinian leaders on Wednesday to seize what he called an historic opportunity and make tough concessions for peace. Defying sceptics who doubt he can deliver on a pledge to seek a deal on a Palestinian state before he leaves office in a year, Bush said he was "very hopeful". He called his trip a "pretty significant nudge" for both sides to make serious efforts to end a conflict that has bloodied the Middle East for 60 years. Launching a tour that will take in Arab allies like Saudi Arabia, Bush also joined Israeli leaders in speaking of a threat from Iran and warned Tehran of "serious consequences" if it attacked U.S. ships after a naval confrontation in the Gulf. "Both leaders are determined to make the hard choices necessary," Bush said after meeting Israeli Prime Minister Ehud Olmert in Jerusalem. He is to meet Palestinian President Mahmoud Abbas in nearby Ramallah in the occupied West Bank on Thursday. "It's a historic opportunity to work for peace," Bush said, standing alongside Olmert. "I wouldn't be standing here if I did not believe that you ... and Mr. Abbas ... are serious." He was vague on the compromises he envisioned -- though he told Olmert he should shut down small Jewish settler "outposts" in the West Bank and reminded Abbas of a promise to crack down on anti-Israel militants. Bush put the onus on the two sides to settle their differences but said he was ready to push and help. "It looks like there needs to be a little pressure. Mr. Prime Minister, you know me well enough to know I'll be more than willing to provide it," Bush told Olmert. "I will say the same thing to President Abbas tomorrow as well." He noted that the two men had finally settled on a plan of negotiations on Tuesday, seemingly prompted by his visit. Olmert said he was ready to make "painful concessions" if it could bring peace, but said Bush had not asked Israel, a key ally in a troubled region, for any specific new commitment. ANNAPOLIS PROCESS In the six weeks since Bush relaunched peace talks at Annapolis after a seven-year hiatus that began as he took office, Palestinians have accused Israel of bad faith for not halting settlement activity, despite longstanding vows to do so. Olmert renewed complaints about rocket attacks from the Gaza Strip, which continued on Wednesday, wounding an Israeli. Two Gazan civilians and a militant were killed in Israeli strikes. Bush and Olmert said Abbas must ensure an end to attacks on Israel, including from Gaza. But the crowded coastal territory, a substantial part of any future Palestinian state, has been controlled by Abbas's rivals, the Iran-backed Hamas, since June. That split is one of several major question marks over the three leaders' abilities to agree on or implement a deal. Demonstrators in Gaza carried posters depicting Bush, whose presidency has been marked by the war in Iraq, as a vampire with blood-dripping fangs and as an enemy of the Muslim world. Olmert leads a fractious coalition including opponents of any negotiation on the "core issues", such as the future of Jerusalem, which he promised again on Wednesday to discuss. The Israeli leader also faces the results of an inquiry into his handling of a costly 2006 Lebanon war, which, officials say, could renew calls for him to resign at the end of this month. Senior Palestinian officials have said this week they fear Israel may try to satisfy Bush with an interim agreement before the president steps down, which would leave key elements of a treaty to establish a Palestinian state unresolved. Bush seems intent on using the waning months of his presidency to try to shape a foreign policy legacy not completely defined by the unpopular war in Iraq. He may also be hoping to stay relevant as he competes for attention with the presidential race back home, a reminder to world leaders they will be dealing with his successor next year. (Additional reporting by Jeffrey Heller, Adam Entous, Avida Landau, Rebecca Harrison, Joseph Nasr, Dan Williams and Alastair Macdonald in Jerusalem, Nidal al-Mughrabi in Gaza and Wafa Amr in Ramallah; editing by Alastair Macdonald and Caroline Drees)
Israel's Prime Minister Ehud Olmert (L) and U.S. President George W. Bush pose with a sports jersey during their meeting in Jerusalem January 9, 2008, in this picture released by the ...
