US President George W. Bush came away from talks with Israeli and Palestinian leaders on Wednesday "encouraged" about prospects for Middle East peace, said White House spokseman Gordon Johndroe.

Bush discussed efforts to reach a deal defining the outlines of a future Palestinian state by year's end in separate telephone calls with Israeli Prime Minister Ehud Olmert and Palestinian president Mahmud Abbas, said Johndroe.

"The president was calling to touch base on the process as well as encourage the two leaders," before he heads to the Group of Eight summit of industrialized nations in Japan on Friday, said Johndroe.

"I think the president was encouraged by what he heard from Prime Minister Olmert and president Abbas. The two leaders are both committed to continue to work with each other and make progress on the core issues," he added.

"I think the president was also encouraged because these two leaders are both still committed to get something done by the end of the year," on defining what a future Palestinian state will look like, said Johndroe.

In his conversation with the prime minister, Bush also expressed "condolences for the terrorist attack that killed and injured so many people today in Jerusalem," spokeswoman Dana Perino said earlier.

A Palestinian man killed at least three people and wounded 45 others when he rammed a bulldozer into buses and cars in central Jerusalem before being shot dead.

Perino said Bush and Olmert had not discussed the stand-off over Iran's suspect nuclear program amid concerns that Israel may take military action if diplomatic efforts fail to freeze Tehran's uranium enrichment activities.

The West fears that enrichment, which can be a step towards a nuclear weapon, proves suspicions that the Islamic republic seeks an atomic arsenal. Tehran denies the charges, saying it wants electricity for civilian use.