RAMALLAH, West Bank—Mideast envoy Tony Blair says he is pessimistic that Israel and the Palestinians will complete a final peace agreement by year's end.

The former prime minister tells the Palestinian newspaper Al-Quds that questions surrounding Israeli Prime Minister Ehud Olmert's political fate have complicated the peace effort.

Blair says "the political situation in Israel makes it difficult to continue being optimistic about reaching a peace treaty between the Israelis and Palestinians by the end of the year."

But he says both sides are still determined to work for peace.

The comments were published Wednesday, a day after he canceled a planned visit to the Gaza Strip over reported threats.