Lawmakers in both parties yesterday welcomed President Bush's decision to seek talks with Iraqi leaders as a sign he is willing to exhaust diplomatic options before using military force.

Democratic congressional leaders said after a meeting with the president last night that his action reinforced their determination not to call a special session of the lame-duck 101st Congress to consider any pre-war resolutions.

Overseas, U.S. allies in the Persian Gulf deployment reacted favorably to Bush's announcement, generally viewing it as the beginning of a broad diplomatic initiative that could lead to a negotiated settlement. {Stories, Page A21.}

On Wall Street, the Dow Jones industrial average, on a steady slide lately, surged 40.84 points to 2559.65. Oil prices also responded to Bush's decision. The price of high-quality crude oil for January delivery plunged $4.06 a barrel, the second largest one-day decline ever, to $28.85 on the New York Mercantile Exchange. Prices of gasoline and heating oil fell several cents a gallon on the exchange. {Story, Page D11.}

But one prominent figure, former secretary of state Henry A. Kissinger, expressed grave concern

about the decision to hold high-level talks with Iraqi officials. "This act today fills me with foreboding," Kissinger said on ABC's "Nightline" last night. "I don't see how the president can fulfill the objectives he has set for himself by the methods he has chosen."

Kissinger, while stressing his support for Bush's aims, said he was worried that the U.S. initiative would encourage European nations or others to start their own negotiations with Iraq and would also open the way for Iraqi President Saddam Hussein to present the United States with negotiating options that would alter the focus of the crisis and erode America's stand.

House Speaker Thomas S. Foley (D-Wash.) and Senate Majority Leader George J. Mitchell (D-Maine) said the president assured them that he has no plans to take any military action against Iraq until after Jan. 15, the date set in a U.N. resolution for Iraq to leave Kuwait and release all hostages. That will give the 102nd Congress, which convenes Jan. 3, sufficient time to act, Foley and Mitchell said.

Bush's surprise announcement appears to have succeeded in pacifying, at least temporarily, some of his harshest critics on Capitol Hill. If Secretary of State James A. Baker III's mission to Baghdad fails, Bush can try to win congressional approval for use of force by arguing that military action is the only option remaining.

"All we're saying is be patient, stay the course, give the sanctions a chance," said House Majority Leader Richard A. Gephardt (D-Mo.). "I don't think anybody in the room rules out force; I certainly don't."

Senate Minority Leader Robert J. Dole (R-Kan.), however, was furious at the leaders for failing to seek a special congressional session. Bush "asked for help about seven times and he came out empty-handed," Dole told reporters after the White House meeting.

But Rep. Henry J. Hyde (R-Ill.) and other GOP leaders told Bush they opposed action by a special session. "It's too important to have a lame-duck group vote on it, and I think most people would want to wait and see how the Baghdad trip turns out," Hyde told reporters.

Senate Armed Services Committee Chairman Sam Nunn (D-Ga.) said, "I welcome this change in the administration's policy," but added that all the discussions should include countries with a stake in the crisis in addition to the United States and Iraq.

"We want to make sure this is not a bilateral situation. This has never been and should not be a U.S. versus Iraq {discussion}, and it's enormously important that our allies be part of this," including other Arab nations in the region, Nunn said. "It's important that this dialogue take place . . . . I think it will give Iraq an opportunity to hear firsthand the determination expressed by the administration on the part of the country."

Rep. Lee H. Hamilton (D-Ind.), chairman of the House Foreign Affairs subcommittee on the Middle East, said, "This is an important step by the president to send a clear signal to Iraq and to explore every possible channel for a diplomatic solution." Hamilton, who had called on the administration to send a high-level emissary to Iraq, noted that the proposed date for Iraqi Foreign Minister Tariq Aziz's meeting with Bush coincided with a planned visit by Soviet Foreign Minister Eduard Shevardnadze. "Other coalition partners in the gulf are well-represented here," he said. "I see the basis for important international talks."

Other Democrats expressed reservations about where Bush's initiative would lead. "Today, the president did nothing to convince me that we should prematurely abandon the policy of economic sanctions, for which a strong domestic consensus exists. We must give sanctions a chance," said Sen. Joseph R. Biden Jr. (D-Del.).

"The president heard what I think all the members of Congress . . . have heard," said Sen. Edward M. Kennedy (D-Mass.). "The nation is not prepared to go to war at this time and believes very strongly that sanctions should be given time."

He added, "The Jan. 15 fuse for war is still lit and the current peace initiative must not be permitted to divert the nation's attention from that fact."

"Anything the president can do to keep the focus of the crisis on diplomacy and not on war is all to the good," said Rep. William S. Broomfield (Mich.), House Foreign Affairs Committee ranking Republican.

Democrats also urged Bush to use this time to try to convince the American public why U.S. action in the gulf is necessary. "If he fails to do so, he invites disaster and a country as divided as it was during Vietnam," said House Armed Services Committee Chairman Les Aspin (D-Wis.).

Bush annoyed some lawmakers by appearing to challenge Congress to come back to Washington and support his policy. "I'd love to see Congress pass a resolution enthusiastically endorsing what the United Nations has done," he told reporters, adding that he hoped to avoid a "hand-wringing operation that would send bad signals."

"In essence, he is daring Congress to act if we disagree with his current policy," Kennedy said. "In fact, the president has a constitutional responsibility to come to Congress for approval in advance, before he goes to war."