Jerusalem ? President Bush warned Iran of “serious consequences” if it meddles again with U.S. warships in the Persian Gulf, opening a Mideast peacemaking mission Wednesday on an ominous note. He told Israel to dismantle unauthorized settlement outposts and demanded that the Palestinians halt rocket attacks from areas controlled by Hamas Islamic militants.

Bush, on his first visit as president to Israel, acknowledged widespread doubts about whether he can break through decades of distrust to achieve his goal of a major peace agreement by the end of his presidency in January, 2009.

“I’m under no illusions,” Bush said at a news conference with Israeli Prime Minister Ehud Olmert. “It’s going to be hard work.”

Unpopular at home, Bush got an extremely warm welcome in staunch ally Israel. With his presidency slipping away and skepticism about the seriousness of his commitment to Mideast peacemaking, Bush hopes an accord would improve a legacy tarnished by an unpopular Iraq war, economic anxieties and other problems.

Already a troubling issue for Bush, Iran jumped back into the spotlight Sunday when Iranian boats harassed and provoked three American Navy ships in the strategic Strait of Hormuz. U.S. officials said Iran threatened to explode the vessels, but the incident ended peacefully.

Bush said “all options are on the table” to protect U.S. ships. He said the Iranian boats “were very provocative and it was a dangerous gesture on their part. … And they know our position, and that is: There will be serious consequences if they attack our ships, pure and simple. And my advice to them is don’t do it.”

Bush already was on the defensive about Iran because a new U.S. intelligence report contradicted White House assertions that Tehran was building a nuclear weapon. The National Intelligence Estimate found Iran halted its program in 2003 under international pressure.

Iran is a particularly sensitive subject here because Iranian President Mahmoud Ahmadinejad has repeatedly called for Israel’s destruction, and Israelis wonder whether Bush has the resolve to deal with Tehran, especially in light of the new intelligence.

Saying he still regarded Iran as a dangerous threat, Bush said, “We’ll continue to keep the pressure on the Iranians. And I believe we can solve this problem diplomatically.”

After a red-carpet airport arrival in Tel Aviv, Bush flew by helicopter to Jerusalem for talks with Olmert and Israeli President Shimon Peres, who cautioned that peace negotiations “may be slow, but the progress can be sweet.”

Olmert said Israel would not accept a peace agreement unless there is a halt to rocket attacks from the Gaza Strip, controlled by Islamic militants dedicated to Israel’s destruction. The U.S.-backed Palestinian president, Mahmoud Abbas, wields authority in the West Bank but not in Gaza, meaning the Palestinian population is effectively split between two governing entities.

“There will be no peace unless terror is stopped,” Olmert told Bush. “And terror will have to be stopped everywhere. He said that “Gaza must be part of the package and that as long as there will be terror from Gaza, it will be very, very hard to reach any peaceful understanding between us and the Palestinians.”

The threat to Israel was underscored Wednesday when Palestinian militants in the Gaza bombarded southern Israel with rocket and mortar fire.

Today, Bush will fly to the West Bank and question Abbas about just that.

“As to the rockets, my first question is going to be to President Abbas, ‘What do you intend to do about them?'” Bush said.

“Because ultimately, in order for there to be the existence of a state, there has to be a firm commitment by a Palestinian government to deal with extremists and terrorists who might be willing to use Palestinian territory as a launching pad into Israel.”

The administration set low expectations for Bush’s eight-day Mideast journey, which also includes stops in Kuwait, Bahrain, United Arab Emirates, Saudi Arabia and Egypt. Bush said it would be unproductive for him to “butt in and actually dictate the end result of the agreement.”