As Arafat lay comatose in a hospital outside Paris, political circles buzzed with speculation on what his death would mean for US involvement in the thorny conflict that rarely came up in the presidential campaign here.

President George W. Bush, buoyed by his solid re-election victory, expressed hope Thursday of making "good progress" in resolving the Israeli-Palestinian feud in his second term, but broke no new ground.

The president, who refused to deal with Arafat, responded to erroneous reports of his death with a "God bless his soul" and a pledge to "continue to work for a free Palestinian state that is at peace with Israel."

"I think it's very important for our friends the Israelis to have a peaceful Palestinian state living on their border," Bush told a news conference. "It's very important for the Palestinians to have a peaceful, hopeful future."

US officials have avoided direct comment on Arafat's deteriorating health or its meaning for the peace process. But the State Department acknowledged intensification of discreet contacts with Palestinian leaders.

With emotions high in the Arab world, Washington was clearly careful to avoid being accused of interference in any jockeying within the Palestinian leadership to replace the 75-year-old Arafat.

The United States has kept a low profile in the peace process since the "road map" for peace it sponsored last year was left in tatters by recurring cycles of Israeli-Palestinian violence.