Israeli Prime Minister Benjamin Netanyahu gave President Obama a gift in Washington this week. It was a copy of the book of Esther, which tells the tale of a benevolent king who saved the Jewish people from an enemy who wished to destroy them - a Persian enemy (not very subtle).

So where does the Israel-Iran conflict end? On Sunday, I had an excellent panel to talk about that and much more.

Daniel Levy is co-director of the Middle East Task Force of the New America Foundation.

Bret Stephens is the foreign affairs columnist for the Wall Street Journal.

Rula Jebreal is an Israeli-Arab journalist who has worked as an anchorwoman in Italy and Egypt.

Elliott Abrams was deputy national security advisor in George W. Bush's administration.

Here's a transcript of our conversation (video above):

Fareed Zakaria: So Elliott, tell us what you think Netanyahu took back from his visit to Washington? What do you think - how did he read the mood and what did he tell his cabinet when he went back?

Elliot Abrams: I think he would have read the desire on the part of the president that he not bomb Iran, but I don't think things changed much during the visit.

He knew that it was the president's view. Certainly in the public discourse, the president did not offer him much more than he had previously done in terms of what the United States would do about Iran.

A slight toughening of the American rhetoric, but not enough, I would think, to change the fundamental Israeli view that they're probably going to need to take care of themselves.

Fareed Zakaria: But you don't think that by saying containment is not our policy. That was a big shift. That was a kind of unequivocal explanation that, you know, we are going to try to prevent this from happening. I thought that was further than either your administration or Obama had gone.

Elliott Abrams: Obama in 2009 used the p-word, prevent, and even in the state of the union message he was pretty tough. To say now, yes, it's good that he said containment is not an option. But when you say things like it's unacceptable or it is my policy to prevent, that still falls short of saying this will not happen, and saying it to the ayatollahs as well. This will never happen.

Bret Stephens: Well, there are some subtleties here. First of all, there's an issue of timing. I think what the president really wanted from the prime minister was don't bomb between now and the first Tuesday in November. I think there was an aspect of the political calculation. There's also a strategic nuance that's very important between Israel and the United States. For Israel an Iranian nuclear break-out capability is tantamount to a nuclear capability.

That's to say if the Iranians have part of their nuclear program here and another part here and another part there and can rapidly assemble it, that gives them a de facto nuclear capability. The United States is saying that break-out capability isn't quite the same thing as being a nuclear power, and that's a distinction that I don't think a lot of people got except at fairly high levels of policy making.

But it's the distinction that matters most of all for Israeli decision makers pondering whether to strike Iran. Can they allow Iran to get to that break-out point, not the point where they can actually test a bomb?

Fareed Zakaria: Interestingly, the Israelis are, shall we say, a little less eager, as far as I can tell, to bomb than the Americans on this table. What do you think the people in Israel will take from this trip?

Rula Jebreal: Well, the newspaper in Israel said yesterday that 58 percent of the Israelis today are against any decision or actually against any attack towards Iran without the U.S. backing it and without the U.S. actually starting it.

Israelis today are actually very worried about the economy in their country. Especially after the last summer we had huge protests in the streets for the high cost of living, and Netanyahu, you know, tried to calm down the things. But the prices of living are becoming very high. Iranian issue is not the first concerns of the Israelis today.

Fareed Zakaria: Would you agree that most Israelis - do you think - I think what you are saying is that in a way Netanyahu is trying to change the subject from a topic where Israelis are really concerned, which is social unrest?

Daniel Levy: This is a fantastic distraction issue - both in terms of domestic, social, and economic issues and, of course, in terms of internationally the Palestinian issue.

For an Israeli leader to come to the United States, make a load of speeches, not mention the Palestinians, a dramatic success in his terms for his right wing coalition. This is top-down driven. Not bottom-up inside Israel.

The kind of speech that the prime minister gave in Washington - Holocaust analogies everywhere - he hasn't made that speech in Tel Aviv or Jerusalem. He was criticized for doing that. The opposition leader said it was scaremongering, it was hysteria, it was shameful use of the Holocaust.

But I think the most important outcome of the visit this week is that the Israeli security establishment folks who are not enthusiastic about an Israeli solo mission, vis-a-vis Iran, I think they got the kind of assurances that they wanted to hear from the American president or enough of them because the Israeli and American positions are actually rather close - ruling out of containment, ruling in at some stage of a military option. In fact, the critique that should be heard perhaps of President Obama's position is not that it's not hawkish enough. But perhaps that given everything going on in the region, given that the Iranian regime is actually weakened now, we're not right sizing the Iranian threat. We're not looking at how do you shift the balance by not focusing nuclear, by focusing on other issues?

Elliott Abrams: The view of the Arabs with whom I speak in the Middle East and particularly the Gulf Arabs - and if you look at opinion polls, you know that opinion polls in those countries are very grim when it comes to their views of Iran.

Daniel Levy: No, sorry. Opinion polls put the Palestinian issue first. America is a greater threat than Iran.

Elliott Abrams: These countries have people that are responsible for their security, and those people are extremely worried about the Iranian threat as is the president of the United States. Put yourself nicely to his left. That's fine. Our leadership is convinced that Iran cannot be allowed to have a nuclear weapon.

Daniel Levy: It's also convinced that Iran has not made a decision to cross the threshold to get a nuclear weapon. That's what Dempsey said, the chief of staff.

Eliott Abrams: Whether they've made the decision yet, as long as they have the opportunity to make it next week, then the question is what does the United States going to do about it?

Rula Jebreal: Let's listen - we've already made this mistake, and I'm sorry, and I understand your position working with the ex administration, we made this mistake ten years ago. We didn't listen to the secret service. We had confused information from the intelligence about Iraq. We went to Iraq. We spent trillions of dollars killing thousands of soldiers, American soldiers, and thousands of Iraqis, and in the end the outcome, they didn't have any weapons of mass destruction.

Plus, you are talking about Saudi Arabia and Qatar. Honestly, if you go to the real Arab mainstream, the streets, and you ask the people shall we attack Iran, do you think today they don't have any sympathy for Iran after the Arab spring, but do you think really they would support that attack? I'm not sure.

Bret Stephens: Part of the problem that you have here, if I may say so, is you are making this out to be an argument against shady intelligence sources, vis-a-vis Iraq. That dog won't bark because the argument you have is with the International Atomic Energy Agency and I'm sure you read the report –

Rula Jebreal: It was ambiguous.

Fareed Zakaria: They claim it's ambiguous. They say we can't certify because they're not cooperating. They do not say there's any kind of smoking gun.

Elliot, I was struck a piece in the New York Times this week pointing out that with all this talk about Iran - and the way in which the subject has been, as Dan was saying, redefined by Bibi - the Palestinian issue has just fallen by the wayside and the article described how the Palestinian leadership was almost kind of so marginalized they didn't know what to do.

Elliott Abrams: Well, it's true. If you look at the Obama-Netanyahu White House appearance together in the oval office, the word Palestine did not escape the lips of either man. Nor did it get mentioned by Netanyahu in his big APAIC speech.

I think this is partly because they're expecting not only the American election this year and a possible Israeli election this year. Nothing will happen until 2013. So I think there is a certain satisfaction that they're off the front page because if they were on it, they would not know what to do.

Fareed Zakaria: Dan, isn't it fair to say that Obama kind of miscalculated, whatever your position on the issue, he got out maneuvered by the Israeli government.

Daniel Levy: Of course, opposing settlements which I think is what you are referring to is a position that every administration has taken. I think it wasn't that he made settlements an issue. The settle in numbers in the West Bank alone have trebled since the beginning of the Oslo Process.

This is an extremely serious obstacle to any potential of a future two-state solution. I think he didn't back it up by being able to win that argument with the Israeli prime minister.

I think that what you are seeing at the moment and the president said quite clearly in his AIPAC speech, this isn't about me being a supporter of Israel. I have given the military support. The Israeli president said there's been unprecedented assistance under this presidency. He said if you are going against me, either it's pure politics, or it's because you don't like the fact that I'm pursuing a two-state solution, and we have to recognize that this is a changing Israel and an Israel in which the majority of members of parliament of the ruling party don't support a two-state solution.

And you increasingly have a shrill debate inside the Jewish community where you have people who represent the majority of American Jews, who have a liberal predisposition. The Tom Friedmans, the J Streets, the new Israel fund trying to walk a tight rope that says 'we're trying to save Israel as a democracy. We're trying to prevent what Israeli prime ministers have called a South Africa apartheid reality.'

We need the help of the American president to do that because there are those of us who won't support apartheid, and imagine there are other people who will.

Bret Stephens: That was a beautiful five-minute speech, and thanks for brooking no interruption, but I wish, Daniel - I wish, and I say this as a guy who is on the other side of the debate. that it could be solved as easily by removing settlements because I think any serious person understands that if that were the only obstacle to peace, the settlements would have been gone long ago.

In fact, they never would have been put there in the first place. It would have been lovely to see Gaza turn into a showcase of what the Palestinians with their talents are capable of. They turn into a group of terrorism and a source for war. That is why Israelis no longer believe, much as they would like to, that settlements are the primary issue here. This is a nice idea because it makes it easy, but the reality is not as easy as you would suggest.

Rula Jebreal: I'm not even sure that you ever have seen a settlement or how it works unless you have seen the facts on the ground. This prime minister, we remember, the heads of Israel is the one that actually destroyed any chance of two-state solutions. And, you know what, Palestinians have to hold back and thank him because there would be only one solution, and that's one state for everybody. I'm not sure that one state would be a Jewish state in the future.

That state will be demographically impossible to hold together, everybody, and it will be not be a Jewish state. One other thing, the Oslo Agreement was signed in 1993. Since then, there are 200 settlements. There were 60.

He is right in saying that most of the steps that were made on the ground, look at even the wall - the wall - the borders between Israel and Palestine are 380 kilometers. The length of that wall is 680 kilometers. What does that mean? It's just about annexing more land. These are the facts on the ground. You don't like them. You like them. The problem is not only with settlements. With Gaza, you can't say, 'OK, I left Gaza, but then you left it so close that it became –

Elliott Abrams: He says the word terror. Terror built the wall. It was a wall for years and years and years after 1967, and Sharon built it when the second intifada was killing Israelis in buses week of week after week. We are not talking terrorists.

Daniel Levy: There's a difference between building a wall on an internationally recognized armistice line and building a wall deep inside of the territory.

Elliott Abrams: It's the only country in the world that is under daily attack, rockets and missiles.

Daniel Levy: It is not under daily attack, Elliott. It's not under daily attack. I'm delighted. The Israeli security establishment acknowledges it is not under attack.

Elliott Abrams: It's because of the wall you denounce and because of the wars you denounce. It's –

Fareed Zakaria: I want to ask one question to Rula because I was struck by one other piece in the newspapers, which was a controversy in Israel that the one Arab on the Supreme Court did not sing the Israeli national anthem. Do you think this caused a huge controversy. Now, you are an Israel-Arab. Do you think it was OK for him? Do you think that his basic - I think the basic view is that Israeli-Arabs are actually second class citizens in Israel, and so they have reasons to dissent. What do you think?

Rula Jebreal: I think the man was standing there respectfully holding his hand. He was listening to everybody else. He didn't attack anyone. He didn't feel like singing it. It didn't represent his really deep value what the state should be and what it stands for, and he was attacked honestly because today in Israel you have to be - like on this table, polarized either with or against. You know what, there's one side. We are all losers there today, all losers.

Brett Stephens: Can I surprise you by agreeing with Rula. There's no question that Israel needs a new deal, a new compact between its Arab citizens and the majority. It needs a new deal also with its ultra orthodox communities. Israel is a democracy that has to do a lot of work to perfect its democracy like every other democracy.

That's a perfectly normal and healthy conversation for Israelis to have. They need to have more of it. That being said, my basic contention is that if the character of the Palestinian state that comes into being is liberal and democratic, Israel is not going to have a problem.

If the green line is the 49th parallel, that is the line that divides the United States from Canada, there is not a problem. The issue that you have now among the Palestinians is not territorial. It is a state in which a party like Hamas with the charter that it has calling on the things that it has –

Daniel Levy: It's a state that these people - I'm delighted to use Barack Obama in suggesting that the 1967 lines should be the future line. I'm happy with the 1967 lines if the state on the other side of those lines, the Palestinian state, is a liberal democracy. That has offered its minorities the same opportunities that Israel offers theirs.

Rula Jebreal: It's what people elect. Whatever people elect, that should be a democracy. Not what we suggest for them to elect. You know what, today we have to accept what Egypt is and what Syria is.