President Bush on Wednesday began his eight-day Mideast peace push with harsh words for Iran during a meeting with Israeli Prime Minister Ehud Olmert.

Iran is a "threat to world peace," said Bush, whose comments come days after a reported confrontation in the Persian Gulf between U.S. warships and Iranian boats. The president's eight-day Middle East trip aims to encourage the Israelis and Palestinians to work toward a peace agreement.

Bush found himself challenged by his Israeli allies concerning a recent U.S. intelligence report saying Iran halted a nuclear weapons program in 2003. Tehran's nuclear ambitions are a chief fear in Israel, and the U.S. report led some in the region — both Israelis and Arab nations concerned about rising Iranian influence — to doubt the U.S. commitment to reining Tehran in.

"The fact that they suspended the program was heartening," Bush said. "The fact that they had one was discouraging because they could restart it."

Olmert said that "there will be no peace" unless attacks are halted from all parts of the Palestinian territories, including those not controlled by his negotiating partners in the Palestinian leadership. But he said that both sides "are very seriously trying to move forward" on a deal.

"Israel does not tolerate and will not tolerate the continuation of these vicious attacks," Olmert said, after two and a half hours of talks with Bush. "We will not hesitate to take all the necessary measures. There will be no peace unless terror is stopped. And terror will have to be stopped everywhere."

Bush declared the trip is a "historic moment, a historic opportunity." But he also said: "I'm under no allusions. This is going to be hard work."

"America cannot dictate the terms of what a state will look like," he added. "We'll help."

Earlier Wednesday, an Israeli airstrike in northern Gaza killed two Palestinians and wounded four others, a move the Israeli army said was taken in response to Palestinian militants who had bombarded the rocket-scarred southern Israeli city of Sderot with rocket and mortar fire.

Bush's arrival in Israel came amid ongoing land squabbles and fears of violence. There's been little headway since he hosted a splashy Mideast conference in November in Annapolis, which launched the first major peace talks in seven years.

But Olmert, despite his tough words on terror attacks, spoke optimistically as well.

"Your visit is timely and is very important to encourage the process that you and Secretary Rice helped start in Annapolis few weeks ago and that we, both sides I believe are very seriously trying to move forward with now in order to realize the vision of a two-state solution," the Israeli leader said.

Bush said he believes both Olmert and Palestinian President Mahmoud Abbas" are determined to make the hard choices necessary."

"Am I nudging them forward? Well, my trip was a pretty significant nudge because yesterday they had a meeting," he said. And he said he would step in when and if his involvement is needed. "You know me well enough to know I'll be more than willing to provide it," Bush said.