AN increasingly emboldened Iran is both complicating and giving promise to the Obama administration's efforts to forge peace in the Middle East. President Barack Obama and his team are reaching out to Iran. At the same time, the Islamic Republic's hostile rhetoric, nuclear activities and missile testing could drive a wedge between America and its closest Mideast ally, Israel. But Iran's disjointed actions appear to be uniting the region against it. The administration hopes to capitalize on what it sees as an unprecedented coalescence of opinion in the Jewish state and its Arab neighbors on Iran. The US wants to use that convergence as leverage to press ahead with Israeli-Palestinian peace efforts as well as seek a broader Arab-Israeli accord. This, officials argue, will isolate Tehran by removing the long-running conflict from the regional security equation. Obama made that case to Israel's prime minister, Benjamin Netanyahu, at the White House this past week. The president is expected to do so again in this coming Thursday in talks in Washington with the Palestinian president, Mahmoud Abbas, as well as in early June when Obama is in Egypt for a major address to the Muslim world. The strategy also involves trying to diminish Iran's influence in Syria and its anti-Israeli proxies in Lebanon by opening the door to better relations with Syria, where special Mideast envoy George Mitchell might go soon, officials said. “The administration has to find the best path,” said Anthony Cordesman of the Center for Strategic and International Studies. “Is this the best path? Given the opportunities, yes. They may not produce success but they offer the best alternative available.” So far, the administration's Iran overtures have not been reciprocated. Israel will resist if the US tries to use the Iran threat to push Israel into making concessions in the peace process. Iran's missile launch this past week probably will try Israel's patience. Israel regards Iran as an “existential threat” and has warned of a unilateral military strike unless there is diplomatic success soon to prevent Tehran from getting nuclear weapons capability. Administration officials said they expressed concern about the launch but stopped short of an outright condemnation to reaffirm their readiness to extend an olive branch to Iran. “We want to keep our hand outstretched,” said one official familiar with the matter who spoke on condition of anonymity to describe internal administration thinking. The Obama team has been conducting an internal review of Iran policy. The administration has concluded it would reverse President George W. Bush's calculated shunning of Iran by reaching out and participating in meetings with Iranian officials on the nuclear issue. The review is evolving and the next steps will be decided in large part based on how Iran responds to the initial overtures, officials said. They say it's unrealistic to expect responses ahead of Iran's elections next month. Israel has deep reservations about an open-ended US approach that could allow Iran to enrich enough uranium to produce nuclear weapons. Israel wants to see the Iranian threat dealt with before pursuing peace deals with the Arabs. In the talks with Netanyahu, officials said Obama sought to allay Israeli concerns by agreeing to set up working groups that will gather senior US and Israeli national security officials to consult on three areas: Iran, Israeli-Palestinian negotiations and the Arab peace initiative. After meeting Netanyahu, Obama said he did not want to set an “artificial deadline” for Iran to respond. Obama stressed that he wanted to see “serious process of engagement” after Iran's June 12 presidential elections, with an assessment of progress by year's end. But US officials said Iran probably won't get until the end of the year to demonstrate its willingness to address international concerns about its nuclear program. Such steps could include accepting an offer from the five permanent members of the UN Security Council (the US, Britain, China, France and Russia) and Germany to suspend uranium enrichment, they said. Dennis Ross, the administration's point man on Iran policy, has suggested the annual meeting of the UN General Assembly in late September will be critical date, according to diplomats he has briefed on US plans. Hillary Clinton told lawmakers this past Wednesday that “the strategy which we are laying out does have a time frame” when “we either see some openness and some willingness to engage on this very important issue with us or we don't.”