Jackson Diehl questions Pres. Abbas' commitment to peace. Settlers fret over what will happen during talks and after the moratorium expires in September. The EU says major powers are working on establishing direct talks, which may begin next week. The PA and Israeli economy ministers meet but Palestinians are adamant about continuing the settlement goods boycott, which they say is working. The PA issues a one-year-on report saying that state and institution building are proceeding in spite of the occupation. Aaron David Miller says direct talks are no panacea. Shlomo Avineri says both Jews and Palestinians are national groups with a right to self-determination. Israel is dismantling a Jerusalem barrier constructed during the second intifada. PM Netanyahu may propose Israeli withdrawal from 90% of the West Bank. Shira Herzog and Leonard Fein both say only two states can bring peace. George Hishmeh dismisses claims that Arabs don't care much about the Palestinian issue.

The Washington Post profiles the joint ATFP/APN internship program for Israeli and Palestinian students. George Will says PM Netanyahu and Pres. Obama do not understand each other. The CSM says land is a symbol of identity for Israelis and Palestinians. James Carroll looks at the importance of Jerusalem. Palestinians are pressing to bring the Quartet into efforts to revive direct negotiations. Netanyahu rejects the 1967 borders as a basis for negotiations. Arab leaders will meet in Cairo. Lebanon considers extending more rights to Palestinian refugees. Palestinian officials say the US has approved their proposal for framing direct negotiations, but await Israel's response. Israel's military is taking the narrowest possible interpretation of a court ruling opening a major West Bank highway to Palestinian traffic. Palestinian citizens who do not serve in Israel's military are denied university housing. Larry Derfner says the flotilla raid was ill-conceived. Interior Minister Yishai confirms that building after Sept. 26 will be confined to existing settlement blocs. Michael Young says Tony Judt's embrace of impossible bi-nationalism was a symptom of the lack of any real solution. Mshari Al-Zaydi says many have a stake in not resolving the conflict. Abdullah Iskandar says Pres. Abbas faces an impossible choice on direct talks.

The NYT says Pres. Abbas should return to direct talks. The reopening of the Jenin Cinema is part of the revival of the city. Israel's Gaza flotilla inquiry doesn't appear to be assigning responsibility. Israel's military chief of staff says his troops weren't ready for resistance during the raid. Nahum Barnea calls PM Netanyahu's testimony “catastrophic.” The UN launches its own inquiry, which may help restore Israel's ties with Turkey. Millions of dollars worth of aid to Gaza is piling up in warehouses. The CSM examines Hezbollah's “evidence” that Israel assassinated former Lebanese PM Hariri. The PA Justice Ministry asks for a clearer separation of powers. A Palestinian cleric is injured trying to block the demolition of a Muslim cemetery in Jerusalem. US officials say they are optimistic about the resumption of direct negotiations. UNRWA denounces an Israeli TV broadcast. Amira Hass says Israeli occupation forces often behave like bullying children with guns. Reports claim DM Barak wanted to launch a major attack on Lebanon following the recent border incident. Right-wing settlers clash with Israeli occupation troops in Jericho. Ali Ibrahim says Arabs should reach out to Israeli public opinion.

Hezbollah's leader again accuses Israel of responsibility for the assassination of former Lebanese PM Hariri. Micah Zenko says Israel should be open about its nuclear arsenal. A PA official denies claims by Fatah officials that a cabinet reshuffle is imminent. Israel will increase water supplies to Bethlehem. Israeli officials testify at the flotilla attack inquiry, and DM Barak takes full responsibility but contradicts PM Netanyahu. Pres. Abbas will again ask the US for clear terms of reference for direct talks and Akiva Eldar says he faces a difficult choice. Barak says that a robust peace process will end international pressure on Israel. Ami Ayalon says Israel should begin the process of voluntary resettlement of settlers back into Israel. Settler rabbis refuse to be interrogated over a book authorizing the killing of non-Jews. Asharq Al-Awsat interviews PLO official Ahmed Qurei. Shlomo Ben-Ami warns that if mishandled, the peace process could lead to war. The Arab News says Hamas is wrong to condemn the Arab League's approval of direct negotiations. Hussein Ibish looks at political and regional influences on Hamas' policies.

Tom Friedman finds wisdom in a new movie about Israelis and Palestinians. Israeli officials are due to testify before the flotilla inquiry. Israelis and Palestinians in Jerusalem use wire to divide themselves. The LA Times looks at lessons and legacies of Israel's unilateral redeployment from Gaza. Israel destroys more Palestinian homes in the Jordan Valley. A Fatah official says there will be a cabinet reshuffle within two weeks. Libya frees an Israeli photographer as part of an aid deal on Gaza. A Palestinian human rights group says Israel plans to deport 20,000 Palestinians from Jerusalem. Pres. Abbas' office again clarifies that he has no objection to Jews serving in any international force deployed in Palestine. A lack of translators is hindering Israeli military police investigations into abuses. A young Palestinian files court charges that Israeli authorities tortured him. Yossi Beilin says until Israel changes its attitude towards peace, it will be isolated. An Israeli court confirms orders to seal a synagogue in an unauthorized settler outpost. The National says Israel should be held accountable for the flotilla attack. Adel Safty says strategic considerations dictate Abbas' return to directing initiations.

Israeli Amb. Oren says the Middle East is at a crossroads between war and peace. A thriving Jenin, with a reopened main cinema, is an example of Palestinian progress in the West Bank. Palestinians say the economy could grow by 20% per year under peace. Hamas' military wing welcomes rocket attacks from Sinai. Palestinian-Israeli and West Bank business leaders meet in Nablus. Several recent border incidents highlight Israeli security concerns. Older Gazans remember Israeli civilians, but youths know only the Army. Three are injured in a clash between Hamas and Islamic Jihad. Hamas leaders urge the kidnapping of Israeli settlers in the West Bank. Zeev Sternhell says it's time for both Israeli and Palestinian leaders to be honest about their intentions. Former HHS Sec. Donna Shalala says she was humiliated at Ben-Gurion Airport because of her Arab heritage. Saudi Arabia is coaxing the PLO to enter direct talks. The BBC profiles child labor in Gaza. Laila El-Haddad says calling Gaza “a prison camp” is an understatement. The New Statesman interviews Palestinian MK Haneen Zoabi. Ori Nir says it's time to confront Israel's extremists. Hussein Ibish says both Arab and Israeli leaders are behaving in an undignified manner.

Israeli Amb. Oren says the Middle East is at a crossroads between war and peace. A thriving Jenin, with a reopened main cinema, is an example of Palestinian progress in the West Bank. Palestinians say the economy could grow by 20% per year under peace. Hamas' military wing welcomes rocket attacks from Sinai. Palestinian-Israeli and West Bank business leaders meet in Nablus. Several recent border incidents highlight Israeli security concerns. Older Gazans remember Israeli civilians, but youths know only the Army. Three are injured in a clash between Hamas and Islamic Jihad. Hamas leaders urge the kidnapping of Israeli settlers in the West Bank. Zeev Sternhell says it's time for both Israeli and Palestinian leaders to be honest about their intentions. Former HHS Sec. Donna Shalala says she was humiliated at Ben-Gurion Airport because of her Arab heritage. Saudi Arabia is coaxing the PLO to enter direct talks. The BBC profiles child labor in Gaza. Laila El-Haddad says calling Gaza “a prison camp” is an understatement. The New Statesman interviews Palestinian MK Haneen Zoabi. Ori Nir says it's time to confront Israel's extremists. Hussein Ibish says both Arab and Israeli leaders are behaving in an undignified manner.

Israeli-Turkish trade remains brisk in spite of tensions. Settlers turn to violence during the dismantling of an unauthorized outpost. Israeli forces demolish rebuilt Palestinian structures in the Jordan Valley. The PA Telecommunications Minister apologizes for harassment of TV and radio stations in Nablus. Israel arrests three Arabs accused of espionage for Syria. Hamas again denounces direct negotiations. Pres. Mubarak remains at the center of efforts to establish direct talks including a phone call with Pres. Obama, and Palestinians say negotiations on terms of reference are proceeding. PM Netanyahu vows to retaliate against Hamas for recent rocket attacks. Israeli police suspect an accused Jewish terrorist was part of a larger cell. Palestinian leaders in Israel threaten a national strike over discriminatory budget cuts, and a new study finds at-risk Arab students receive much less funding than Jewish ones. D. Bloomfield says Pres. Abbas' hesitation greatly assists Netanyahu. Gaza human rights groups blame Hamas for a large explosion. Israel plans to fight international isolation. Abdul Rahman Al-Rashed says Abbas must make some tough decisions. Michael Jansen says direct talks could be a trap for the Palestinians.

Speculation about a wider conflict grows in the aftermath of the clash at the Israel-Lebanon border. Andrin Hauri says the international community must do more to support Palestinian state and institution building. An Israeli airstrike kills a Palestinian in Gaza. Israeli police again raze a rebuilt Bedouin village that was recently destroyed. Egypt says Palestinian factions in Gaza were responsible for recent rocket attacks. Palestinians say there are now more than half a million Israeli settlers in the occupied Palestinian territories. Gaza girls take up fishing to feed their families. Shlomo Avineri says support for a “one-state” arrangement from the Israeli right is rooted in opposition to ending the occupation. Menachem Klein questions the effectiveness of Palestinian state building but concludes Israel's system of control in the West Bank is nonetheless doomed. Eytan Gilboa warns Israelis not to conclude that Pres. Obama will not again pressure them on peace. Hezbollah leader Nasrallah accuses Israel of being responsible for the assassination of former Lebanese PM Hariri and vows to produce evidence. IT technology allows Israeli and Palestinian teenagers to build friendships.

The NYT says Israel is right to cooperate with the UN investigation into the flotilla attack. Rocket attacks show how militants could use Sinai. Andy Zelleke and Robert Dujarric say the price of an Israeli attack on Iran may be a Palestinian state. Occupation forces shoot a Palestinian worker in Gaza. The PA says growth is dependent on international donors. Three Lebanese soldiers and a journalist are killed by Israeli troops at the border. Israel approves 40 new settlement apartments in occupied East Jerusalem. Pres. Abbas declines to set a date for direct talks. PM Netanyahu says he made no commitments to the US on direct talks. Palestinian activists ask female protesters to dress modestly. Americans for Peace Now launches a video campaign against settlement construction. Building in Gaza is focusing more on recreation than reconstruction. Israel allows a convoy of 250 trucks into Gaza. Gershon Baskin says hope must continue for peace. The last Palestinian kaffiyeh factory struggles to survive. Daphna Baram says liberal Israelis may soon face prosecution. Leslie Susser says “one-state” proposals from the Israeli right are a ploy to prevent ending the occupation. Joseph Mayton says Gaza's plight also presents opportunities.