President Bush gently urged Mideast leaders to "make the hard choices necessary for peace," leaving it to embattled Israeli Prime Minister Ehud Olmert to stand before a divided parliament Thursday and forcefully declare that this war-weary nation is ready for a historic agreement with Palestinians.

On a day mourned by Palestinians as the 60th anniversary of their uprooting by Israel's independence, Bush mentioned the Palestinians only once in a 23-minute speech to the Knesset - and then only in the context of what a Palestinian state would look like six decades from now.

Some Israelis and Palestinians were disappointed that Bush failed to use his high-profile appearance to push the two sides to take the concrete steps to achieve his own goal of a peace deal before the end of his presidency.

Most notably, Bush's speech ignited a political uproar on the campaign trail back home.

Democratic presidential candidate Barack Obama lashed back after Bush condemned "the false comfort of appeasement" and said that "some seem to believe that we should negotiate with the terrorists and radicals, as if some ingenious argument will persuade them they have been wrong all along."

The White House insisted the remark was not aimed at Obama and that Bush was repeating standard U.S. policy. But Obama issued a statement accusing Bush of using the 60th anniversary of Israel's founding "to launch a false political attack" against him. Obama has said that as president he would be willing to meet personally with the leaders of such U.S. adversaries as Iran, Syria and Cuba.

Five months after Bush launched the first serious Mideast peace talks in seven years, the effort seems to have run out of steam. Olmert, facing his fifth criminal investigation in two years, is weak and unpopular and his support in parliament is unclear. The Palestinians are weak and divided, as well, and decades-old disputes remain unsettled.

Bush, in his remarks, did not delve into the obstacles but skipped to a rosy scenario 60 years ahead.

"Israel will be celebrating the 120th anniversary as one of the world's great democracies, a secure and flourishing homeland for the Jewish people," Bush forecast. "The Palestinian people will have the homeland they have long dreamed of and deserve - a democratic state that is governed by law, and respects human rights, and rejects terror. From Cairo to Riyadh to Baghdad and Beirut, people will live in free and independent societies, where a desire for peace is reinforced by ties of diplomacy and tourism and trade."

He did not explain how that would be achieved. Bush predicted Iran and Syria would be peaceful nations and that the Islamic militant groups al-Qaida, Hezbollah and Hamas would be defeated.

On a five-day Mideast trip, Bush flies to Saudi Arabia on Friday and to Egypt on Saturday.

Bush's speech was seen as a missed opportunity by some on both sides.

"It was an embarrassing speech, a collection of slogans that somebody wrote for him in order to be nice to Israel, or what he thinks is Israel, and to steer well clear of anything concrete," said Israeli lawmaker Yossi Beilin, a member of the dovish Meretz party and one of the prime architects of the Oslo peace accords. "It's a shame and a scandal, in my opinion."

Palestinian negotiator Saeb Erekat said of Bush: "He could have been much different. We expected the president to really tell the Israelis that to really live in peace and security ... the occupation must end and an independent Palestinian state must be created. This would have been the speech we expected but unfortunately we didn't hear it."

White House press secretary Dana Perino said the speech was intended as a celebration of Israel's founding. "It's not meant to be a kitchen-sink speech," she said.

It was left to Olmert to make the most forceful case for a peace agreement as Bush listened a few feet away.

Olmert spoke of an accord "based on two states for two people, a Jewish state and a Palestinian state, living side by side in peace. This agreement will be approved in the Knesset by a large majority and will be supported by the vast majority of the Israeli public," Olmert said.

There were murmurs and stirring among some lawmakers at Olmert's prediction. The prime minister turned to Bush and joked that the president's aides had probably told him the Knesset is "calm" and "tranquil." Bush chuckled. Two hardline lawmakers walked out in protest during Olmert's address.

"Israel has no stronger desire than to achieve peace with our Palestinian neighbors," Olmert said.

Olmert also cautioned Bush about Iran. "The threat is not aimed at Israel alone," he said.

Most Israelis favor a peace agreement and the idea of an independent Palestinian state. However, the public is skeptical about reaching a deal under current conditions.

Palestinian President Mahmoud Abbas is widely seen as being too weak to carry out an agreement, and many Israelis fear that if Israel withdraws from the West Bank, it would follow the same fate as Gaza, which was taken over by the Hamas militant group last June and is now a launching ground for rocket attacks. Most Israelis also oppose dividing the holy city of Jerusalem, a key Palestinian demand.

Olmert also has suffered from low popularity since Israel's inconclusive war in Lebanon in 2006 and, more recently, a new corruption investigation. A poll this week showed 60 percent of Israelis think Olmert cannot promote peacemaking because of the latest police investigation into his conduct. The same number think he should resign.

Palestinians marked the day with rallies, sirens and black balloons, recalling the hundreds of thousands of Palestinians who either fled or were driven out of their homes during the 1948 war over Israel's creation. Palestinians call it their "nakba," Arabic for catastrophe.

Before appearing before the Knesset, Bush toured Masada, the ancient fortress on a plateau in the desert overlooking the Dead Sea. It is said to be the place where Jewish rebels killed themselves and each other 2,000 years ago rather than fall into slavery under the advancing Romans army. Thursday night, Bush hosted a reception at the Israel Museum, which houses the Dead Sea Scrolls, the oldest biblical manuscripts in the world.