Washington - US President Barack Obama said Tuesday he has seen some encouraging sign of progress in the Middle East that could help move toward achieving an Israeli-Palestinian peace deal.

Obama noted Tuesday's announcement by the Israeli government that construction permits for new settlements in the West Bank have not been issued for months. He also cited the improvement of Palestinian security forces and the economy in the West Bank and the removal of some Israeli checkpoints.

"I'm encouraged by some of the things that I'm seeing on the ground," Obama said during a meeting with Egyptian President Hosny Mubarak, who was making his first visit to Washington in five years.

Obama and Mubarak's discussion focused on the Israeli-Palestinian conflict and Arab support for reaching a settlement. They also touched on Iraq, Iran's nuclear programme, reform and bilateral issues.

"We have perhaps focused greatly on the Palestinian issue because it's the pivotal issue," Mubarak said through a translator. "And Palestinian issue has impact on the world, on the region, whether for the West or also for the United States."

Securing an Israeli-Palestinian peace agreement is among Obama's top foreign policy priorities. His special envoy, George Mitchell, has made numerous trips to the region to jump-start the process.

Obama and Israeli Prime Minister Benjamin Netanyahu have publicly disagreed - a rarity in US-Israeli relations - on the settlement issue. The Israeli government said Tuesday no new permits have been issued since Netanyahu took office five months ago, but remained steadfast that construction to expand existing settlements will continue.

Obama wants an end to all settlement building and growth, but welcomed the announcement that no new permits have been issued.

"There has been movement in the right direction," Obama said. "And I think that the Israeli government has taken discussions with us very seriously."

"Everybody's going to have to take steps. Everybody's going to have to take some risks," Obama said.

The meeting with Mubarak was Obama's third since taking in office. Obama met with the Egyptian for the first time in June when he gave a major address in Cairo designed to reach out to Muslims and Arabs in an effort to bring an end to the animosity toward the United States. They also met during the Group of 15 summit in Italy in July.

"The importance of the Cairo visit was very appreciated by the Muslim and Islamic world because the Islamic world had thoughts that the US was against Islam," Mubarak said. "But his great, fantastic address there has removed all those doubts."

Mubarak cancelled a May visit to Washington following the death of his 12-year-old grandson.(dpa)