Israeli Prime Minister Benjamin Netanyahu will attempt to narrow a growing divide with the Obama administration when he delivers a major policy speech in the coming days, his aides say — perhaps even endorsing the concept of a Palestinian state at the risk of alienating his hawkish coalition.

In one curious twist, Netanyahu's message — and his room to maneuver — could be at least partially linked to the outcome of Friday's election in Iran.

Painted into a corner by his right-wing coalition and an American president bent on progress toward peace, Netanyahu is facing a moment of truth when he will have to decide between the two. For now, it seems his all-important American allies will be the focus of his efforts, though it's unclear if he will go far enough for Washington.

If he tries to straddle the middle when he delivers his speech on Sunday, Netanyahu may find himself pleasing no one — neither those in his government who favor Israeli settlements on land the Palestinians claim for a future state, nor Washington, which is demanding those settlements be frozen.

In the speech, aides say he is likely to finally come out in favor of Palestinian statehood, a key U.S. demand. But they say he will also attach a number of conditions to his endorsement, including that Palestinians first recognize Israel as a Jewish homeland and agree not to have an army.

A victory by moderates in this week's Iranian elections, coming just days after an electoral setback for the anti-Israeli Hezbollah group in Lebanon, could undercut Netanyahu's efforts to keep the world focused on Iran — and instead shine a spotlight on his own refusal to endorse Palestinian statehood or heed Obama's call for a settlement freeze.

A victory by Iranian hard-liners could bolster Netanyahu's argument that Iran's nuclear ambitions, not Israel's conflict with the Palestinians, should be occupying the world's attentions.

This is not the only irony at play in Netanyahu's world.

If he drops his opposition to Palestinian independence — as two Israeli Cabinet ministers predicted he will — he might buy some breathing room in his drive to keep building houses inside existing West Bank settlements. His predecessor, Ehud Olmert, spoke eloquently about the need for a Palestinian state while quietly expanding settlements.

Whatever the case, being at odds with the United States, Israel's chief ally, is an extremely uncomfortable position for any Israeli prime minister to be in.

By all accounts, Netanyahu's speech will seek to address the concerns of Obama, who made it clear in a major speech in Cairo last week that he sees Israeli settlements as illegitimate and Palestinian statehood as a fundamental U.S. interest.

The two Israeli ministers, speaking on condition of anonymity so as not to pre-empt Netanyahu's speech, said they believed the prime minister would utter the words "Palestinian state" during the address, while at the same time stressing that such a state must not possess an army that could threaten Israel.

Yossi Alpher, a former intelligence official and government adviser, said he expects to "hear an attempt to accommodate or outflank the Obama administration on the one hand while holding on to his coalition on the other."

Alpher said he believes Netanyahu's hawkish coalition could survive a settlement freeze and the "beginning" of peace talks aimed at creating a Palestinian state.

"But just the beginning. The minute substantive issues come up, someone will object," he added.

One way Netanyahu might seek to outflank Obama is by opening up a dialogue with Syria, Alpher said. That could force Obama to have to choose between pushing for progress on the Palestinian track or accepting the Israeli priorities, he said.

Palestinian disunity has emerged as perhaps the biggest factor working against the energetic U.S. peace push. Palestinian moderates of the Fatah movement now control only the West Bank while the Gaza Strip, the other part of a future Palestinian state, is in the hands of Hamas militants.

Egyptian-brokered talks aimed at getting Fatah and Hamas to reconcile have been faltering over Hamas' refusal to recognize Israel's right to exist. And while Obama appears to have adopted a somewhat gentler tone than his predecessor on the issue of Hamas, the group's stranglehold on Gaza can bolster any Israeli argument that Palestinians aren't ready for independence.

Still, the Obama team, with its unyielding call for a settlement freeze and its push for region-wide Arab acceptance of Israel, seems serious about moving toward the partition of the Holy Land into two states.

Secretary of State Hillary Rodham Clinton has unequivocally rejected Israel's insistence that some settlement construction be allowed to accommodate growing settler families.

Any attempt by Netanyahu to garner wiggle room by endorsing the "two-state solution" or taking down small unauthorized settlement outposts in the West Bank may well not be enough.

A sense that a turning point is arriving for Netanyahu is palpable among both the Israeli left and right.

"I'm happy that Obama is forcing us to confront the truth," said David Lapid, a settler in one of the illegal outposts slated for destruction, expressing hope that Netanyahu would take the settlers' side, not Obama's.