Israeli President Shimon Peres suggested that President Obama is putting too much focus on trying to halt settlement construction in the Palestinian territories, urging all sides to broaden the scope of Mideast peace talks.
In an exclusive interview, Peres said President Obama is expected to moderate the meeting, which could lead to a resumption of peace negotiations, between the two at the end of September at the United Nations.
"Yes, I think they will meet by the end of September. President Obama will chair it, and I think that at least there is a chance that they will decide they are going to reopen negotiations," Peres said, adding that Hamas would not be a part of the discussion.
But in order for that to happen, the Israelis may have to agree to suspend or halt settlement construction, as Obama demands. Peres said a deal is possible but that the issue is still unresolved, as he urged all sides not to over-emphasize the matter.
"I think it would be right for the Obama administration and for our administration and for the Palestinians to handle the whole set of steps, not a single one, because if you are singling out one, maybe the least important is becoming the most important, and that's the case of natural growth," he said, when asked if Obama was right to push early on for a settlement freeze.
"On that particular issue, there is not yet an agreement. Negotiations are going on. I do believe there is a solution for it as well. ... It must be soon. It's very hard to convince your own people to make so many concessions -- to take so many risks," the Israeli president said.
"(Netanyahu) is aware of the choice, and he knows there is no chance, no escape, no alternative to go ahead and make peace. He knows he must do it ... it's just not a simple proposition."
Obama's call for a complete freeze on settlement construction has met resistance among the Israeli population. A recent Jerusalem Post poll showed only 4 percent of Israelis see Obama as pro-Israel.
"I think the president's views on this have been made clear. There's been no directional change from us," Gibbs said, adding: "We're certainly hopeful that progress is being made."
But Netanyahu signaled some willingness to budge when he conditionally endorsed the creation of a Palestinian state back in June.
One significant complication with any peace talks is that even if the Israelis promise to suspend or halt settlement construction, the terrorist group Hamas still controls the Gaza Strip and Abbas cannot negotiate for all Palestinians.
Peres said this is a "serious question" and means "we cannot have a solution in one try."
Peres meanwhile defended Israel's right to respond to attacks from Hamas. Peres said in the interview Sunday that Israel will "reply immediately" if attacked by Hamas -- one day after Israeli Air Force planes bombed a tunnel in the northern Gaza Strip in response to a rocket fired by Palestinian militants into an Israeli town.
"They know immediately there will be retaliation," he said. "There is an unwritten game between us and them. They know if they won't respect it, they will pay heavily."
Another issue sure to come up in the Abbas-Netanyahu-Obama meeting, if it occurs, is Iran.
Peres told FOX News he's convinced by intelligence he's seen that Iran is trying to build a nuclear weapon, and that Israel must work to convince other nations Iran is not only a threat to Israel.
He said Iran is "totally" financing and training Hamas and that he does not have confidence in the International Atomic Energy Agency to keep Iran's nuclear activity in check.
The United States and five other nations are preparing to meet later this week to address concerns about Iran's nuclear program.
"I think that Israel must be very careful not to create the impression that Iran is a danger only to Israel," Peres said. "Iran is a world danger and Israel shouldn't monopolize this danger."
FOX News' Bret Baier contributed to this report.