Jerusalem ? Secretary of State Condoleezza Rice said Wednesday that Israelis and Palestinians have a new “moment of opportunity” to forge peace despite the eruption of fresh tensions between the two sides over preparations for a U.S.-hosted Mideast conference.

Even as President Bush said he was optimistic about the conference and the creation of a Palestinian state, Rice faced growing difficulties in her efforts to organize the meeting set for November or December to launch formal Israeli-Palestinian peace talks.

Rice cautioned the going would be tough as she wrapped up four days of intense shuttle diplomacy during which she met twice with Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas to bridge wide gaps over a declaration the conference is to endorse.

“I do think it is moment of opportunity, but there is very hard work ahead,” Rice told reporters at a news conference with Israeli Foreign Minister Tzipi Livni, who’s leading the Israeli negotiating team.

Underscoring the challenges, the Palestinians accused Israel of not being serious enough and Abbas said Israeli actions, including West Bank military raids, were damaging the pre-conference atmosphere.

Israel is “hindering the endeavor to reach a document with substance,” Abbas said after seeing Rice at his office in Ramallah, stressing little time is left for the meeting. “We must not waste time.”

The Israelis and Palestinians have vastly different expectations for the conference, where they are to present a document that would start negotiations to create a Palestinian state. The Palestinians want a detailed document. The Israelis favor a general agreement.

A senior Palestinian official said Abbas was disappointed by U.S. suggestions that he significantly scale back their demands for the joint statement to address Israeli concerns.

The Palestinians want the document to include at least a sentence or two on how to solve each of the issues of dispute, such as borders and Jerusalem, the Palestinians have maintained.

The Palestinians’ core demand is that the future border between Israel and Palestine be based on the pre-1967 Mideast War lines, with modifications through land swaps. Israel captured the West Bank and other areas in the 1967 war.

Rice asked Abbas whether he could accept a more vaguely worded statement, which would not mention the 1967 lines. She also asked whether the Palestinians were willing to drop a mention of Palestinian refugees, another key issue for the Palestinians, from the document, the official said.