U.S. President George W. Bush on Thursday called Israeli settlement expansion an "impediment" to the success of revived peace efforts and urged the Jerusalem to follow through on its pledge to dismantle unauthorized settler outposts.

Speaking less than a week before his first presidential visit to Israel and the West Bank, Bush voiced optimism at the prospects for securing an Israeli-Palestinian peace deal by the end of 2008, a goal set at last November's Annapolis conference that has been viewed with some skepticism.

Bush said he would use his trip to keep up pressure on both sides, including making clear to Israelis his concern about continued Jewish settlement activity.

"I will talk about Israeli settlement expansion, about how that is, that can be, you know, an impediment to success," in an interview at the White House with Reuters. "The unauthorized outposts for example need to be dismantled, like the Israelis said they would do."

Asked about Bush's comments, Prime Minister Ehud Olmert's spokesman Mark Regev said, "Israel is committed to meeting all our obligations under the road map and if the Palestinian side moves similarly on its commitments, I believe there is a real chance for substantive progress in the coming months."

Bush's trip follows a U.S.-hosted conference last month in Annapolis, Maryland, where Olmert and Palestinian President Mahmoud Abbas pledged to try to forge a peace deal by the end of 2008.

"I feel good about it," Bush said when asked about the prospects for a deal by the end of this year.

He said such a timeframe "may not be a comfortable calendar for the two parties that actually have to negotiate the deal." But he added, "Both leaders ... understand this is a great opportunity to define a state and the fact that I'll be leaving office 12 months from now serves as a backstop."

Asked whether he would hold three-way talks with Abbas and Olmert during his visit, Bush said, "I don't know. It's not on the calendar now. But there will definitely be substantial talks with the Israelis and the Palestinians."

Bush also acknowledged that part of the reason for his January 8-16 Middle East trip is "absolutely" about efforts to contain Iran's influence in the region.

Bush said that on his trip, which starts in Israel and will include stops in Saudi Arabia, Egypt, Kuwait, Bahrain and the United Arab Emirates, he expects questions about a U.S. National Intelligence Estimate last month that said Iran had stopped its nuclear weapons program in 2003.

"I will clarify to them that the NIE means that Iran is still a danger," he said.