President Bush remains convinced that a peace deal between Israelis and Palestinians is possible by the end of the year, despite the failure of the his peace process, launched at the big Middle East conference at Annapolis in November, to make any discernible progress. Secretary of State Condoleezza Rice has pointed out that continued Israeli settlement activity in the West Bank is "problematic". The deteriorating economic position of the Palestinians, especially in Gaza which remains effectively under Israeli blockade, makes the prospects for progress bleak.
