Binyamin Netanyahu is expected to endorse a “two-state solution” in a much-heralded speech this weekend, but he may stall on American demands to freeze Jewish settlements in the West Bank.

Feeling the squeeze between the US Administration, which wants a moratorium on settlement growth and a commitment to a Palestinian state, and his national-religious coalition, which favours neither, the Israeli Prime Minister appears likely to try to steer a middle course.

Israeli newspapers were full of speculation about what Mr Netanyahu — who has so far refused openly to back a Palestinian state alongside Israel — might offer to deflect pressure from Washington. Ehud Barak, his Defence Minister, urged him this week to recognise a Palestinian state, but members of Mr Netanyahu’s right-wing Likud party have cautioned him against the move.

Haaretz, the centre-left newspaper, said that the Prime Minister was likely to mention a two-state solution and pledge to adhere to the “road map” — a US-brokered document that calls for an end to Israeli settlement building and a clampdown on militant groups by the Palestinian Authority. The road map was adopted in 2003 but both sides have accused each other of failing to meet their obligations.

The Israeli media have predicted that when he speaks at Bar Ilan University in Tel Aviv on Sunday night, Mr Netanyahu will recommend an immediate resumption of negotiations with the Palestinian Authority, but will also set out some demands, including that the Palestinians should recognise the state of Israel as the homeland of the Jewish people.

While accepting the road map Mr Netanyahu is not thought to be planning to mention an explicit freeze on settlements, as demanded by President Obama in his keynote speech to the Muslim world in Cairo last week.

In conceding to a two-state solution, he may even try to ask the US to relax its demands that all settlement expansions should be stopped — a move that is vehemently opposed by Mr Netanyahu’s national-religious constituency.

Such a compromise would in effect take the peace process back to where it was under the previous centre-left Government of Ehud Olmert, whose resignation amid repeated corruption allegations eventually brought the Israeli Right to power this year. Mr Olmert had pledged to take action against settlements but opponents said that the Jewish communities built on land conquered by Israel in the 1967 war still enjoyed an unprecedented growth spurt while he was in office.

The dilemma faced by Mr Netanyahu will raise uncomfortable memories of his first stint as Prime Minister in the late 1990s, when his fractious right-wing coalition toppled him after he yielded to American pressure to hand over tracts of the West Bank to the control of the Palestinian Authority as part of the now defunct Oslo peace accords.

Analysts noted that Mr Netanyahu appeared to have been taken by surprise by the strength of Mr Obama’s resolve to thwart the growth of settlements.

Members of the ruling coalition, wary of their leader caving in, have cautioned the Prime Minister against giving too much away before negotiations have even resumed. “The US pressure is mainly psychological. One should not forget that the President is not the only one in the United States. There’s the Congress and the Senate, which support Israel,” Miri Regev, a Likud MP, said.

Another powerful member of Mr Netanyahu’s party, Benny Begin, the son of Israel’s first right-wing Prime Minister, Menachem Begin, said that “if the only solution is two states for two peoples, then there is no solution”.

Mr Netanyahu has in the past opposed the creation of an independent Palestinian state, arguing that such an entity would soon fall under the control of the Iranian-backed Hamas, the Islamist movement that rules the Gaza Strip.

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