In scattered protests marking the anniversary of Israel's first day of statehood on May 15, 1948, Palestinians in the occupied West Bank and Gaza Strip threw rocks towards Israeli police and troops, who fired tear gas and bullets in the air.
In a speech marking what Palestinians call the "Nakba", or catastrophe, when some 700,000 Arabs fled or were forced from their homes during Israel's foundation, President Mahmoud Abbas said: "Isn't it time for Israel to respond to the call of a just and comprehensive peace and achieve historic reconciliation between the two peoples on this sacred and tortured land?"
But Palestinian political analyst Ali Jarbawi said Bush's rhetoric showed Washington was not being an honest broker: "He is not talking about a two-state solution. He is talking about a state of leftovers for the Palestinians," Jarbawi said.
Arabs are especially sensitive to what they see as amnesia, or worse, among Israelis and foreigners about how many of them were forced into exile in 1948. By saying Jewish "refugees arrived here in the desert", Bush may have done little to persuade many Palestinians their own refugees are not forgotten.
Amid the standing ovations that have followed him since he arrived in Israel on Wednesday, there was some discord.
Three Arab members of Israel's parliament held up a sign reading "We shall overcome" and were escorted out of the Knesset chamber as Bush began to speak.
"HOPEFUL" ON DEAL
Asked about Bush's speech, White House spokeswoman Dana Perino said the president was "hopeful" a deal could be struck by the time he leaves office.
In Ramallah in the West Bank, pedestrians stood at attention as sirens wailed for two minutes to remember the Nakba.
Calling Bush "the leader of evil in the world", Hamas official Sami Abu Zuhri said the group would never grow weak.
At Masada, a cable car carried Bush high above the Dead Sea to the plateau where, according to a Roman-era historian, 960 Jewish men, women and children committed suicide rather than surrender to Roman legions crushing a rebellion.
There have been few signs of progress in US-brokered negotiations since promises were made at a peace conference in Annapolis, Maryland, in November.
In the latest setback to a deal, Israeli Prime Minister Ehud Olmert has said he will quit if indicted in a police corruption probe. The split between Abbas and Hamas and fighting between Israel and Hamas in Gaza have also hampered peace efforts.
On Friday, Bush and his wife Laura will wind up their visit to Jerusalem and fly on to Saudi Arabia before weekend talks in Egypt with Abbas and other Arab leaders.
