BEFORE THE Gulf war, American efforts to move an Israeli peace proposal into realistic Israeli-Palestinian talks had foundered. The resulting American-Israeli tensions were overtaken by the war, which turned U.S.-Israeli relations to high strategy. To keep the anti-Iraq coalition intact, Washington urged Jerusalem not to react to Iraq's unprovoked Scud missile attacks, providing it with Patriot antimissile batteries -- and with well-earned praise. Now both countries are looking to a postwar phase of the Arab-Israeli dispute. Having confronted Iraq's occupation-by-aggression, Americans accept a need to address Arab demands for attention to Israel's very different occupation-in-self-defense. Israelis are stiffening against any American call for steps not of their own design.

This is the context of recent exchanges. The U.S. State Department broached the idea of demilitarizing the Golan Heights, which Israel captured from Syria in 1967; Prime Minister Yitzhak Shamir asserted Israel would accept no changes in the Golan. The Israeli army detained on undocumented spying allegations Oxford-trained philosopher Sari Nuseibeh, Palestinian proponent of dialogue with Israel; the State Department objected. Mr. Shamir followed by provocatively inviting into his cabinet Rehavem Zeevi, leader of a party that advocates "transferring" West Bankers to Jordan. An unseemly spat has now developed over American insistence that Israel not use the large extra immigration subsidies it is requesting to settle immigrants in the West Bank; Israel said it was getting the "runaround," a suggestion the White House found "outrageous."

Some perspective on the relationship is needed. Israel is America's one democratic ally in the Middle East. It is, though not at war, under Iraqi assault -- six dead, hundreds injured from the missiles. Many Palestinians in the West Bank, not to speak of Israeli Arabs, cheer on Saddam Hussein and exult in his attacks on Israel. The PLO has just opened up a new "front" against the Israeli presence in southern Lebanon.

In fact, the Bush administration has necessarily sidelined its earlier attempt to move Israelis toward dialogue with the PLO. Moreover, it is giving a respectful new hearing to the old Israeli idea that peace with existing Arab states must be part and parcel of any accommodation with Palestinians. (Hence, Washington's interest in using its Gulf-coalition partnership with Damascus to explore the possibilities of an Israeli-Syrian postwar warming.)

But Palestinians are still there, and they must be dealt with somehow. "Transfer" is unthinkable -- a Saddam-type option. Indefinite confrontation between the intifada and the occupation is hopeless. A careful experiment in Israeli-Palestinian coexistence is essential, and the United States has strong geopolitical and moral reason to take part actively in it.