Washington: President George W. Bush said in comments aired yesterday he was 'very optimistic' a Palestinian state could be set up alongside Israel and that next month's Middle East conference could lead towards peace in the region.

The US-sponsored conference is due to take place in the Washington area in mid to late November, although there are doubts over how far it will go towards ending decades of conflict and uncertainty over which Arab states will attend.

"I am very optimistic that we can achieve a two-state solution," Bush said in comments on Al Arabiya television that were dubbed in Arabic.

"We will host the international peace conference and it will be attended by the interested parties and a delegation from the Arab League and it is an opportunity for serious ... discussions over the road forward to lead to a two-state solution and efforts will be made to reach this objective," Bush said.

"I want to affirm that the two-state solution is part of a comprehensive peace in the Middle East and that our strategy is for all parties to attend at the table for the sake of a comprehensive peace. We want to push this issue."

Israeli and Palestinian leaders agreed on Wednesday that formal negotiations on Palestinian statehood would begin after the peace conference.

But Israeli Prime Minister Ehud Olmert has baulked at Palestinian President Mahmoud Abbas's call for setting a specific timeframe for the resolution of key issues.