He emphasized that what Israelis and Palestinians need is a true and lasting peace instead of a piece of paper, and that it is in Israel's interests to establish "a viable, peaceful Palestine."

U.S. Democratic presidential candidate Senator Barack Obama (R) shakes hands with Israel's Prime Minister Ehud Olmert in Jerusalem July 23, 2008.

Turning to another front that manifests the U.S.-Israeli alliance, Obama said he would "take no options off the table" to prevent a nuclear Iran.

"A nuclear Iran would be a game-changing situation, not just in the Middle East, but around the world," said Obama. "A nuclear Iran would pose a grave threat, and the world must prevent Iran from obtaining a nuclear weapon."

Asked about his previously stated notion of having talks with Iranian leaders, Obama said he still holds that if it would promote the national security interests of the United States, he would be willing to meet with any leader.

"We should exhaust every possible avenue" on Iran, dealing with the issue with "carrots and sticks," said the candidate, adding that if Iran rejects the offers, then "we will be in a stronger position" to call on the international community to respond collectively against the Islamic republic.

Iraq's Prime Minister Nuri al-Maliki (R) speaks with U.S. Democratic presidential candidate Barack Obama (L) in Baghdad July 21, 2008.

Obama arrived in Iraq Monday morning after a visit to Afghanistan, the first leg of his Middle East and European tour.

The Democratic presidential candidate has promised, if elected, he will withdraw the U.S. troops from Iraq within 16 months, and send more troops to Afghanistan where security situation is getting worse.