Israeli Prime Minister Ehud Olmert, left, with Palestinian President Mahmoud Abbas during their meeting at Olmert's residence in Jerusalem, 28 Aug 2007

Many Israelis and Palestinians are skeptical about the chances for a final peace deal a day after their leaders began tackling the core issues of the Middle East conflict. Israeli Prime Minister Ehud Olmert and Western-backed Palestinian President Mahmoud Abbas opened talks on the so called "final status issues" -- including the status of Jerusalem, Palestinian refugees and final borders. It was the first time these issues have been discussed since the peace process collapsed in a wave of violence seven years ago.

The long years of fighting and bloodshed have eroded trust on both sides. The Israeli mood is summed up by analyst Dan Schueftan.

"Peace between Israel and the Palestinians is not even a remote option. We will have to learn to live with the idea that for generations the Palestinian people has decided that fighting us is more important than giving a better future for their children," Schueftan said.

Those fears were reinforced after the Islamic militant group Hamas seized control of the Gaza Strip from Mr. Abbas's more moderate Fatah faction in a civil war two months ago. Senior Hamas official Mahmoud al-Zahar said negotiations with Israel are a waste of time.

He says the only way to liberate Palestine is through jihad or holy war.

Palestinian moderates, like former Cabinet minister Ziad abu Zayyad, said Israel's failure to advance the peace process brought Hamas to power.

"There is no chance of a peace agreement," Abu Zayyad told Israel Radio. He said Israel does not have the resolve to dismantle dozens of Jewish settlements in the West Bank.

So with that much skepticism, why are Israeli and Palestinian leaders reporting progress on a framework for a peace agreement? Schueftan, the Israeli analyst, says the answer lies in Washington.

"The Americans want to do something. And their approach is, we need to do something, this is something, so let's do it," Schueftan said.

The view among many observers is that Israeli and Palestinian leaders don't want to disappoint the United States, which plans to convene an international peace conference in November.