President George W. Bush said in comments aired on Friday he was "very optimistic" a Palestinian state could be set up alongside Israel and that next month's Middle East conference could lead towards peace in the region.

The U.S.-sponsored conference is due to take place in the Washington area in mid to late November, although there are doubts over how far it will go towards ending decades of conflict and uncertainty over which Arab states will attend.

I am very optimistic that we can achieve a two-state solution," Bush said in comments on Al Arabiya television that were dubbed in Arabic.

"We will host the international peace conference and it will be attended by the interested parties and a delegation from the Arab League and it is an opportunity for serious ... discussions over the road forward to lead to a two-state solution and efforts will be made to reach this objective," Bush said.

"I want to affirm that the two-state solution is part of a comprehensive peace in the Middle East and that our strategy is for all parties to attend at the table for the sake of a comprehensive peace. We want to push this issue."

Israeli and Palestinian leaders agreed on Wednesday that formal negotiations on Palestinian statehood would begin after the peace conference.

But Israeli Prime Minister Ehud Olmert has balked at Palestinian President Mahmoud Abbas's call for setting a specific timeframe for the resolution of key issues including borders and the fate of Jerusalem and the Palestinian refugees.

Abbas said on Thursday that formal negotiations for statehood could be completed six months after the conference.

"There is a lot of dialogue between the two men and I believe the Palestinians and the Israelis have realised that there is a vision that is worth working to achieve," Bush said.

ARAB DOUBTS

Aside from the Israel and the Palestinians, the United States would like key Arab states to attend the conference but is unclear how many will.

Syrian President Bashar al-Assad has said Damascus would not join unless the agenda also includes the Golan Heights, captured by Israel from Syria in the 1967 war at the same time as the occupation of the West Bank and Gaza.

U.S.-ally Saudi Arabia, driving force behind an Arab peace proposal relaunched earlier this year, has also indicated it would not attend unless the conference addresses core issues.

The peace conference is part of a U.S.-led effort to bolster Abbas and his West Bank-based government and to isolate Islamist group Hamas, which seized control of the Gaza Strip in June.

Hamas, which has carried out dozens of suicide and rocket attacks on Israel, has rejected the conference.

"No one wants the establishment of a state that will be a launchpad for attacks on others," Bush said.

"We must support the Palestinian security forces, help President Abbas and offer him financial support so that Palestinian citizens can be assured that the life that lies ahead of them is better."