As U.S. envoy George J. Mitchell wrapped up his Mideast trip Friday with little to show for his efforts to kick-start peace talks, the Obama administration was signaling a growing pessimism that Israelis and Palestinians would return to negotiations any time soon.

In his first visit since November, Mitchell met separately with Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas. But officials on both sides said little progress was made toward restarting talks that collapsed a year ago.

Even as Mitchell was holding meetings in Jerusalem and the West Bank city of Ramallah, President Obama told Time magazine that he had doubts that Israeli and Palestinian leaders were ready to make the compromises needed to engage in a "meaningful conversation." "And I think we overestimated our ability to persuade them to do so."

Obama acknowledged that his administration's efforts "this year didn't produce the kind of breakthrough that we wanted, and if we had anticipated some of these political problems on both sides earlier, we might not have raised expectations as high."

Having grown frustrated with its efforts to resolve the conflict, the United States may be preparing to step back from the diplomatic process.

Secretary of State Hillary Rodham Clinton said Thursday that U.S. efforts to broker talks would continue but emphasized that the next step would be up to the two parties.

"At the end of the day, they must make that decision," Clinton said in Washington at a news conference with British Foreign Secretary David Miliband.

A U.S. role in mediating talks is seen as crucial to bridging differences and building trust. Last summer, Obama pressured Netanyahu to endorse the creation of a Palestinian state, but the Israeli leader would not agree to a total construction freeze on lands seized after the 1967 Middle East War, including parts of East Jerusalem.

Palestinians have said they will not return to talks without a settlement freeze.

On the eve of meetings here with Mitchell, rhetoric from both sides dimmed hopes for a breakthrough.

"Palestinians have climbed up a tree . . . and they like it up there," Netanyahu said, referring to the Palestinians' preconditions for talks.

The Israeli leader also called for an Israeli military presence along the eastern flank of any new Palestinian state in order to prevent the importing of weapons.

Palestinian negotiators said Israel was trying to sabotage talks and defended their demands for a halt in settlement construction.

"When we say [we want] a settlement freeze that includes Jerusalem, that is not a Palestinian condition; it's an Israeli obligation," chief Palestinian negotiator Saeb Erekat said Friday after meeting with Mitchell. Some analysts cautioned against attempting to restart talks in the current hostile environment.

"I question the wisdom of the administration putting so much of its prestige into starting negotiations when those negotiations are not likely to succeed," said Yossi Alpher, co-editor of Bitterlemons.org, an Israeli political analysis firm. "Failed negotiations could bring about a more serious deterioration in the form of another intifada."