Washington - Democratic presidential candidate Barack Obama provoked a flurry of reaction Wednesday by touting Jerusalem as the "undivided" capital of Israel, going further than the current administration of President George W Bush who was holding talks with Israeli Prime Minister Ehud Olmert at the White House.

Obama, speaking before an Israeli lobby group in Washington, said any future Palestinian state must be "contiguous and cohesive" but rejected East Jerusalem as the capital of that state.

"Jerusalem will remain the capital of Israel, and it must remain undivided," Obama told the American Israel Public Affairs Committee (AIPAC), one day after clinching the Democratic Party's nomination for president.

Palestinian President Mahmoud Abbas criticized the remarks later Wednesday. He said there would be no peaceful solution to the Middle East conflict without a resolution of the status of Jerusalem, which both sides claim as their capital.

Israel captured East Jerusalem in 1967 and later annexed the region - a move that remains unrecognized by a majority in the international community.

State Department spokesman Sean McCormack also distanced the US government from Obama's remarks, saying any final decisions on the toughest issues in the peace talks were for Israel and the Palestinians to make on their own.

"It is for the parties to resolve these issues. And we are going to continue to do what we believe is right in terms of ... helping to bring about peace, without respect to presidential politics," McCormack said.

Obama's comments came as Bush and Olmert held talks on the peace process and the wider Middle East at the White House. Bush said the world must consider Iran a threat to peace in the region as Olmert was expected to press the US on stepping up efforts to prevent Iran from acquiring nuclear weapons.

"Iran is an existential threat to peace. It is very important for the world to take the Iranian threat seriously," Bush said in brief comments at the White House soon after Olmert's arrival.

Olmert called Iran the "main threat to all of us" and said he welcomed Bush's commitment to Israel during his visit to the region last month.

The two leaders were also set to discuss political instability in Lebanon and Israel's ongoing peace talks with Syria, revealed in May, which Olmert said "may lead to pull out Syria from the axis of evil."

Israeli media reports ahead of the meeting said Olmert would ask Bush to step up US and international action against Iran and prepare for a possible military strike against its nuclear facilities.

Olmert himself told the gathering of AIPAC Tuesday night that international sanctions against Iran must be strengthened.

"International economic and political sanctions on Iran, as crucial as they may be, are only an initial step, and must be dramatically increased," he said.

Israel views Iran as its main existential threat, given Tehran's nuclear drive and President Mahmoud Ahmadinejad's often-repeated statements that the Jewish state should be wiped off the map.

Iran says it is only seeking civilian nuclear energy and denies it has attentions of acquiring atomic weapons.

Obama also pledged tough carrot-and-stick diplomacy against Iran in order to defend Israeli and US interests telling AIPAC there was "no greater threat" to Israel than Iran.

Obama said he wanted to correct misunderstandings that he would be soft on Iran and threatened consequences if Iran refuses to stop nuclear development, stop supporting terrorism in the region and above all, stop threatening Israel. (dpa)