US President Donald Trump is close to a decision on whether to recognize Jerusalem as Israel's capital, his son-in-law and Middle East peace envoy Jared Kushner said Sunday.
Palestinian leaders are lobbying desperately against such a move, fearing it could provoke such fury in the Arab world it could sink peace hopes for a generation.
But Kushner, the 36-year-old head of a small and tight-knit White House negotiating team, made a rare public appearance to put an optimistic face on his efforts.
"The president's going to make his decision," Kushner told the Saban Forum, choosing not to deny reports Trump will declare Jerusalem Israel's capital on Wednesday.
"He's still looking at a lot of different facts and when he makes his decision he'll be the one who wants to tell you. So he'll make sure he does that at the right time."
On Monday, Trump must decide whether to sign a legal waiver that would delay plans to move the US embassy from Tel Aviv to Jerusalem for another six months.
Every US president has done this since 1995, judging the time not ripe for such a move, and Trump is expected to begrudgingly do so for a second time this week.
But, according to diplomats and observers, he is also now expected to announce in a speech on Wednesday that he supports Israel's claim on Jerusalem as its capital.
- New intifada? -
This will likely provoke fury among Palestinians and the wider Arab world, and may hamper Kushner's long-shot effort to revamp the Israeli-Palestinian peace process.
Palestinians have been lobbying regional leaders to oppose the decision and the armed Islamist movement Hamas has threatened to launch a new "intifada".
But Kushner, addressing a sympathetic audience at an annual meeting of Israeli and US policy-makers hosted by businessman Haim Saban, sees grounds for optimism.
The real estate developer turned presidential adviser is working closely with Israeli officials and has developed ties with the young Saudi and Emirati monarchs.
He sees an opportunity for peace if the Sunni Arab countries of the region align themselves with Israel in opposition to the threat of Iran.
Israel's Prime Minister Benjamin Netanyahu shares this hope, although he dares hope an accommodation with Arab countries could precede any Palestinian deal.
Kushner, in common with US official thinking under previous administrations, sees a Israeli-Palestinian settlement as coming before any great re-alignment.
"You've got to focus on solving the big issue," he told a friendly but frankly skeptical Saban, and an audience of dignitaries and policy experts.
"The regional dynamic plays a big role in what we think the opportunities are because ... a lot of these countries look and say they all want the same thing.
"And they look at the regional threats and I think that they see Israel, who is traditionally their foe, is a much more natural ally to them than it was 20 years ago."
"You've a lot of people who want to put this together, but you have to overcome this issue of the Israeli-Palestinian conflict in order for that to happen," he said.
- 'Regime will fall' -
Earlier, Netanyahu also addressed the forum by video link from Israel, and also spoke of the opportunity for reconciliation in the region.
But his focus was firmly on the threat of Iran, which he again compared to Nazi Germany in its alleged determination to "murder Jews."
His address barely touched on the Palestinian issue, but did speak of regional peace, under a longer timeframe than the one Kushner has in mind.
"And that's just one reason why I'm so hopeful about the future. Today Israel is more welcomed by the nations of the world than ever before," Netanyahu said.
"When I look forward 50 and 100 years I believe Israel will be embraced openly by its Arab neighbors rather than in secret in the way it's done today."
Saeb Erekat, secretary general of the Palestine Liberation Organization, was less optimistic, warning a change in the US stance on Jerusalem would spell disaster.
In a statement, he warned the United States would "be disqualifying itself to play any role in any initiative towards achieving a just and lasting peace."