Tony Blair is tonight calling for a total rethink of the approach to the Middle East in a speech which admits that military action in Iraq and Afghanistan had alienated moderate Muslims and undermined the War on Terror.

The Prime Minister, seeming to break from the tough stance adopted with President Bush four days ago, said that the wider problem of extremism would never be conquered unless there was a lasting peace between Israel and the Palestinians.

As soon as conflict in Lebanon ends, all efforts had to be focused on resolving that dispute, Mr Blair believes.

His plea for the use of more "soft power" was immediately interpreted as a rebuke to Mr Bush for failing to fully engage in the Middle East peace process, despite repeated claims that it was a priority for his administration, as well as an acknowledgement of the deep concerns over his tactics in his own party.

Mr Blair’s change of emphasis followed growing tensions within his Cabinet over his tough approach to the Lebanon crisis. The Times understands that Foreign Office officials pushed hard last week for Mr Blair to exert pressure on Mr Bush to call for an immediate ceasefire, but were rebuffed by No 10.

The move was understood to have been endorsed by Margaret Beckett, the Foreign Secretary, who then demanded that Mr Blair show some sign that he was not slavishly following Washington by banning from Britain US flights re-arming Israel.

Again Downing Street resisted strongly and Mrs Beckett was forced to accept a compromise brokered by Des Browne, the Defence Secretary, that the US planes would stop over in Britain but only at American bases.

Mrs Beckett is understood to have made it plain to Mr Blair not only that a wide body of opinion in the Foreign Office but also in the Labour Party were strongly opposed to his tactics. He seems belatedly to have moved towards them in his San Francisco speech.

Mr Blair’s speech in Los Angeles to the World Affairs Council, on the same day that four British servicemen were killed on active duty, said that the wider problem of extremism would never be conquered unless there was a lasting peace in the Middle East.

His speech suggested that he had become frustrated with Mr Bush for failing to fulfil his promise to fully engage on the peace process. Aides described it as a challenge to the US, not a change of attitude.

As fierce fighting continued in Lebanon, Mr Blair said the immediate priority was ending the conflict and he was still hopeful there would be a UN resolution.

"We will continue to do all we can to halt the hostilities. But once that has happened we must commit ourselves to a complete renaissance of our strategy to defeat those who threaten us," he said.

There was an "arc of extremism" now stretching across the Middle East and reaching countries outside that region.

"To defeat it we need an alliance of moderation to paint a different future in which Muslim and Christian, Arab and westerner, wealthy and developing nations can make progress in peace and harmony with each other," he said.

"My argument is we will not win the battle against this global extremism unless we win it at the level of values as much as force, unless we show we are even-handed, fair and just in the applications of those values to the world.

"At present we are far away from persuading those we need to persuade that this is true.

"Unless we reappraise our strategy, unless we revitalise the broader global agenda on poverty, climate change, trade and in respect of the Middle East, bend every sinue of our will to making peace between Palestine and Israel, we will not win and it is a battle we must win."

Officials said it was "nonsense" to suggest the speech showed Mr Blair was having doubts about war in Iraq.

Mr Blair’s plans for his summer holiday, due to start this weekend, are now under review. The Prime Minister will decide on Thursday whether he intends to change his arrangements.

Officials said that the Prime Minister believed as much effort should have gone on resolving the Israel-Palestine dispute as had been spent on military action in Iraq and Afghanistan.

"What we accept is that we haven’t persuaded Arab and Muslim world that we are committed to the same things they are, including peace in between Palestine and Israel," his official spokesman said.

Other aides said Northern Ireland showed that resolving conflict required effort "day in and day out", an approach that was now needed for the Middle East.

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