A day after he was prevented from visiting Gaza by an assassination threat, Tony Blair raised doubts for the first time yesterday that a peace deal could be concluded between Israel and the Palestinians by the end of the year.

Mr Blair, the international community’s envoy to the Middle East, said that the uncertain political future of Ehud Olmert, the Israeli Prime Minister, was undermining efforts to conclude a deal, which President Bush had said would be signed in 2008.

“The political situation in Israel makes it difficult to continue being optimistic about reaching a peace treaty between the Israelis and Palestinians by the end of the year,” the former Prime Minister told the Palestinian newspaper al-Quds.

Mr Olmert is not expected to stand for re-election in party primaries in September after becoming engulfed in a corruption inquiry that has severely damaged his already shaky popularity.

He is suspected of receiving hundreds of thousands of dollars in bribes from Morris Talansky, a Jewish American businessman, over 15 years before becoming Prime Minister.

In addition to allegedly handing over envelopes full of cash, Mr Talansky told police that he was never repaid by Mr Olmert after the Israeli politician called on him to foot the bill for stays in hotels in the United States or expensive holidays.

Mr Olmert denies the allegations.

Mr Talansky is due to be cross-examined today by Mr Olmert’s lawyers. Mr Olmert has said that he will quit if he is indicted but the scandal — the latest in a series of police inquiries into his financial dealings — has already caused the Labour Party, the main coalition partners of his ruling Kadima party, to threaten a walkout if the leadership issue is not resolved.

Mr Olmert has been a key figure in revitalising talks with the Palestinians, forging a close personal bond with Mahmoud Abbas, the Palestinian President, on whom much of the process hangs.

He has also opened indirect talks with Syria, one of Israel’s most entrenched regional enemies, in an attempt to loosen its ties with Iran.

Mr Blair, who has often spoken openly of his belief in Mr Olmert’s commitment to peace, has until now appeared optimistic that a breakthrough could be made to resolve the longstanding conflict. He said recently, however, that the spring and summer of this year would be crucial to the effort.

His comments yesterday appeared to show the first signs that his optimism might be waning, with the possibility that he may focus on his other activities.

Mr Blair later issued a statement seeking to soften the pessimistic tone of his interview. “I have always said it is possible to get a deal this year, and that remains my view. Of course the situation is difficult but I am convinced the parties are still working hard for a deal and are determined to achieve agreement by the end of the year,” he said.

Mr Blair’s predecessor, James Wolfensohn, resigned in frustration after a year in the job.

Faltering steps

June 2007 within hours of leaving office, Tony Blair appointed Middle East envoy for the US, Russia, UN and EU

July reveals vision to lay groundwork for a Palestinian state. Travels to Jerusalem

September returns to Middle East to confront deepening crisis in Israel and Gaza Strip

December 2007 reveals three big projects on the West Bank and £3.5 billion in donors' pledges

January 2008 Palestinian leaders give his Middle East mission a 5 per cent chance of success

May 2008 announces deal to roll back Israeli occupation of West Bank and create basis for a functioning Palestinian state

May 2008 two Israeli fighters threaten to shoot down the private plane taking him to a Middle East conference, suspecting it of staging a terrorist attack

July 2008 security threat forces him to cancel a trip to the Gaza Strip. Raises doubts over a peace deal by the end of the year

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