Prime Minister Ehud Olmert and U.S. Defense Secretary Robert Gates see "strategic changes" taking place in the Middle East that boost prospects for peacemaking, according to a statement released by the Prime Minister's Office following a meeting the two in Jerusalem on Thursday.

The statement said moderate Arab states see "extremist Islam" as "the immediate and main danger to stability" in the region.

Gates sought Thursday to ease Israeli concerns about a planned American weapons sale to Gulf Arab allies, saying the U.S. remains committed to preserving Israel's military edge over its neighbors.

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Gates, who also met with Foreign Minister Tzipi Livni and Defense Minister Amir Peretz on his 24-hour trip to Israel, said his meetings did not include any discussions on military action against Iran.

Israeli officials have objected to U.S. plans to sell arms to Saudi Arabia and other moderate Gulf states, fearing it would damage Israel's deterrent capabilities in the Middle East. The New York Times reported earlier this month that Washington has delayed the arms sale package because of the Israeli objections.

Speaking to reporters in Tel Aviv before his departure, Gates said he had urged Israeli leaders to look at the deal in terms of the overall strategic environment and stressed that Israel's neighbors have other alternatives for purchasing arms.

"I'm confident that the Russians would be very happy to sell weapons to countries in the region," he said. Gates said he affirmed the U.S. will continue to help Israel maintain its qualitative military edge, but did not say whether the Saudi deal would go through.

Olmert and Gates had a "positive" conversation Thursday, which included discussions on the Iranian nuclear program, Israeli officials said after the talks in Jerusalem.

The one-hour meeting at Olmert's office also touched on Syria, Lebanon and the Palestinians, officials said.

"It was a fine, positive conversation," said government spokesman Miri Eisen. "They talked about regional aspects, strengthening defense cooperation with the United States."

She declined to elaborate.

Gates also confirmed the U.S. commitment to Israel, noting that he is the first Pentagon chief to visit country in eight years.

"I think the fact that I have come here in the end of my fourth month as secretary illustrates the importance that I attach to our relationship with Israel," he said.

Before their meeting Thursday, Olmert said he was very proud and grateful for the visit. "It gives us an opportunity to speak to the most powerful man in the defense establishment in the United States of America, which is extremely important to us."

Gates also visited Yad Vashem before departing. At the memorial, he visited the Hall of Remembrance, rekindled the eternal flame and laid a wreath. He also stopped at the children's memorial, in which the names of the 1.5 million children killed by the Nazis are read.

Gates said he felt it was important "to pay my respects to the 6 million Jews who died in the Nazi genocide."

During their meeting, Livni called on the international community to take a tough attitude against Iran.

"Every hesitation will be interpreted as weakness," a Foreign Ministry statement quoted Livni as telling Gates.

"We live in a neighborhood were image has importance and if the impression is created that the world cannot beat the 'neighborhood bully,' they [Iran's neighbors] will want to join it," she warned.

Livni called for "flexibility" by the Arab League, which at a Wednesday meeting in Cairo urged Egypt and Jordan to press Israel on the 2002 Arab peace initiative, relaunched at the Arab League summit in Riyadh in late March.

Following his Wednesday meeting with Peretz in Tel Aviv, Gates said diplomatic efforts to resolve the standoff with Iran over its nuclear program are working.

"We agreed it was important to deal with the Iranian nuclear problem through diplomacy, which appears to be working," Gates said.

Peretz told reporters during the press conference that "2007 will be a critical year for thwarting the Iranian plans."

"Iran presents a threat not only to Israel, but to the entire free world," he said. "This problem is of concern to all of us and we are certain that the world will not stand aside."

"We expect that the U.S. and the world will stand by us regarding the Iranian nuclear issue," he added. "I congratulate the U.S. on the Security Council decision regarding sanctions."

While Peretz welcomed the diplomatic efforts, the defense minister said Israel could not rule out using other options.