The signs are growing that a U.S.-Israel confrontation is in the works. But it doesn't have to happen. As President Barack Obama prepares for his major speech in Cairo, both sides need to step back and ask themselves how did we get ourselves into this situation and what can each do to extricate itself from an unnecessary conflict.

In truth it is the last thing either the U.S. or Israel needs.

For America, a rift with Israel will not impress the moderate Arabs despite their rhetoric, because what is on their mind is the Iranian and Islamic extremism threat. U.S. displeasure with Israel will send a message of U.S. diversion from and even weakness on the central strategic issue threatening the region.

Moreover, the notion that Israeli steps stopping natural growth in the settlement blocs will turn the Muslim world around is an illusion. Let us remember that as Prime Minister, Ehud Barak offered to dismantle 80 percent of the settlements, and Prime Minister Ariel Sharon dismantled all the settlements in Gaza. And Israel's security fence in the West Bank indicated that all settlements east of the fence would eventually disappear. Yet none of these significant steps regarding settlements produced any moderation or concessions on the Arab or Palestinian side.

On the Israeli side, particularly with Israel's priority being the existential threat of a nuclear Iran, not to mention continuing unresolved issues with Hamas in Gaza and Hezbollah in Lebanon, the last thing Israel needs is a confrontation with its main ally. Prime Minister Benjamin Netanyahu had his eye on the ball in his meeting with President Obama. His commitment to dismantle the illegal outposts, something that none of his predecessors lived up to because of political circumstances, is a significant concession clearly taken so as to maximize the possibility of a strong American position on Iran. But now Israel is hearing that that is not enough, that trust and cooperation now depend on a complete freeze of settlement activity, including natural growth.

If both governments accept the notion that a confrontation is in neither one's interest, then the way out lies in certain steps each should take.

Israel should simply find a way to acknowledge that a solution to the conflict requires a Palestinian state. By saying already that it accepts all prior agreements that it will abide by the road map, and by virtue of their looking to the actions of President George W. Bush, who was the first American president to call for a two-state solution, the Israeli government has all but accepted that concept. The issue should not be if a Palestinian state, but what kind of a state and when that state should or can come into being. In truth, it is not a great leap for the prime minister to say this, and it could go a long way to soften potential tensions with the U.S.

On the American side, there needs to be acknowledgement and appreciation that Netanyahu is taking political risks by dismantling the illegal outposts. Also, more needs to be done to make clear that, while America is asking certain things from Israel, that Israel is our great ally and that we never want to leave the impression that we are weakening ties with Israel in order to win over the Muslim world. Finally, the U.S. must understand Israel's issue with natural growth, with room for compromise on the issue.

Israel should simply find a way to acknowledge that a solution to the conflict requires a Palestinian state.

If these parameters were established, definitions of natural growth could be set which would satisfy Israel's need for a normal life in the settlement blocs and satisfy American demands that natural growth not be a cover for expanding territory. Indeed, Israel reportedly has already gone a long way to such a compromise by agreeing not to confiscate any further land and no longer to provide financial incentives to expand settlement.

The collision doesn't have to happen.

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