"We hope in the months and years ahead to forge peace with the Palestinians and to expand that into a vision of a broader regional peace," Prime Minister Benjamin Netanyahu said Thursday.

Speaking during a reception at the residence of Egyptian Ambassador Yasser Reda in Herzliya, days before US President Barack Obama's peace envoy, George Mitchell, is expected in the region for new talks about how to renew peace efforts, Netanyahu praised the 2002 Arab Initiative for regional peace.

"I believe that this spirit can help create an atmosphere in which a comprehensive peace is possible," he said, adding that Israel appreciates(Egyptian President Hosni) Mubarak's efforts to ward off the radical forces and push towards peace.

Addressing the relations between Israel and Egypt, the prime minister said the countries still have a long way to go before reaching a "very warm" peace.

President Shimon Peres, who also attended the ceremony, called Mubarak a strong and great leader who safeguards peace and stability in the Middle East. He said Israelis would never forget (slain Egyptian president Anwar) Sadat, and called him a pioneer in the search for peace.

Peres said there was a real opportunity for peace with the Palestinians and the entire Arab world, and that Mubarak could lead the process," said the president.

Minister Benny Begin, whose father, deceased Prime Minister Menachem Begin, signed the peace agreement with Egypt in 1979, was also on hand for ceremony, as were other ministers and Knesset members, including Opposition leader Tzipi Livni of Kadima.

The Israeli Navy has recently increased its activity in the Suez area, in cooperation with the Egyptian authorities that oversee the canal. This sea route significantly shortens distance and travel time to Africa and is crucial for operations in the Red Sea.

Nabil Abu Rdainah, an aide to Palestinian President Mahmoud Abbas, reacted to Netanyahu's statements by saying the Palestinians were ready to "immediately" resume talks on a two-state solution based on an Israeli pullout from land captured in 1967, including East Jerusalem.

If Israel met these terms, including a halt to settlement construction, "the road to peacemaking will be open", Rdainah said.

Netanyahu, a right-wing leader in office since March, has so far rejected US and European demands to halt settlement building in the occupied West Bank.

Egypt was the first Arab country to sign a peace treaty with Israel in 1979, and was followed in 1994 by Jordan.