On Friday, new Iranian president Hassan Rouhani attended an annual celebration in Tehran for Al-Quds Day, a holiday named for Jerusalem that is meant to show solidarity with Palestinians and typically includes plenty of state-sponsored Israel-bashing. So Iranian media, and the world, were curious to see how this more moderate and peace-espousing new Iranian leader would handle the event. What happened there, though it took less than a minute, has become the latest flashpoint in a high-stakes debate over Rouhani's true beliefs and his policy intentions toward Israel, with the Israeli leader also weighing in.

The first sign was not a promising one. Iranian state media interviewed Rouhani, whom they quoted as saying, "Israel is a wound on the body of the world of Islam that must be destroyed." While such rhetoric is common among Iran's hard-liners, such as the departing President Mahmoud Ahmadinejad and the Supreme Leader Ali Khamenei, it seemed a dramatic departure for Rouhani – and a dispiriting early indication that, despite hopes of peace, his rule may not be so different than his predecessors'.

But, within a few hours, a state TV video of the encounter emerged that appeared to show Rouhani saying something significantly different. According to a translation by Al-Monitor's Arash Karami, who broke the story, Rouhani had actually said this:

Quds day, which is in memorial of Imam [Khomeini], is a day that people present the unity of Islam against any type of oppression or aggression. And in any case, in our region, it is an old wound that has been sitting on the body of the Islamic world, in the shadow of the occupation of the holy land of Palestine and the dear Quds. And this day, in fact, is a remembrance that Muslim people will not forget this historical right and will always stand against oppression and aggression.

This version contains no reference to "removing" or "destroying" – the most controversial aspect of the original. The New York Times' Thomas Erdbrink quickly reported a similar translation, although his version has "sore" rather than "wound." Iranian outlets that had produced the original quote issued corrections.

But not everyone is accepting the newer version, video evidence or no, and some argue that the substance of the quote is immaterial. As discussion swirled online, the official social media arms of both the Iranian and Israeli leadership weighed in, pushing very different readings of Rouhani's quote and, thus, his stance toward Israel. The issue is a sort of proxy for a larger debate that will likely rage in the Western world during Rouhani's tenure: Should his gestures toward moderation and peace-making be taken at face value, or are they merely a trick by an implacably hostile regime to lull those who have opposed it into a sense of false security?

The more hard-line interpretation of Rouhani's quote has been championed, most prominently, by the office of Israeli Prime Minister Benjamin Netanyahu. When Rouhani's original quote first emerged and before it was corrected, Netanyahu said, in a statement, "Rouhani's true face has been revealed earlier than expected." The statement explained that Rouhani's quote should "rouse the world from the illusion" that either he or Iran is anything less than fully committed to acquiring a nuclear weapon with which to "threaten" Israel.

When Iranian state media disavowed the first reported quote and the video showed Rouhani saying something different, Netanyahu's office insisted he was standing by his original condemnation, which they reiterated on Twitter. That Rouhani appeared to have in fact said something very different didn't matter; deep down, they argued: The original quote reflected how Rouhani truly feels, whether he actually said it or not.

Meanwhile, a Twitter account that claims to represent Rouhani (the account is not verified but is generally considered to be associated with his office) sent out an English-subtitled version of the video showing his full quotes, which matches up with the New York Times translation. The account also tweeted of the video, "Some media quoted Rouhani as saying that Israel must be eliminated. This is a proof 4 the falsehood of these claims."

Why would Netanyahu's office stick to such a negative reading of Rouhani's quote, despite evidence that he had said something much milder than originally thought? On its face, this might seem strange, given that presumably Netanyahu would prefer to live in a world where Iran's president does not want to threaten or destroy his country. But the somewhat stubborn stance makes sense in the context of Netanyahu's oft-repeated view of the Iranian government as a largely monolithic entity bent on aggression toward or the outright destruction of Israel. For Netanyahu, Rouhani's quote didn't reveal anything new so much as confirm what Netanyahu already saw as established truth. The sooner the rest of the world comes around to his way of thinking, in this view, the easier it will be for Israel to rally more international support against Iran.

Netanyahu's view of Rouhani, also shared by conservative pro-Israel groups in the United States, holds that any hint of apparent moderation is either a willful trick or a mere distraction from Iran's aggressive agenda. But that leaves little to no room for a peaceful resolution with Iran. It also sets an almost impossibly high bar for Rouhani, who has not even entered office yet and is already publicly pushing for peace -- that's not a politically easy thing to do in Tehran, where hard-liners are always looking for blood – and has issued one of the mildest Quds Day statements by an Iranian president in years.

There is still some real room for interpretation in Rouhani's full statement. It's not clear precisely what he meant by "occupation." In most contexts, this refers to the Israeli occupation of Palestinian territories, a situation that that draws common criticism from the West and even within Israel itself. It's also possible he was referring specifically to the Temple Mount, which is also a holy site in Islam and is a frequent focal point of Iran's Quds Day. But it's more worrisome that there is a real case to be made that he may have been referring to Israel proper, which in Iran is often described as not a legitimate state but as illegally occupied Palestinian territory.

No one knows exactly what Rouhani meant by "occupation" except for Rouhani himself. (The unverified Rouhani Twitter account directly challenged the idea that he had called for Israel's elimination.) Perhaps the best we can do, then, is to place this comment in context with Rouhani's other public remarks. And that's where it  becomes clear why this quote's implications have been so disputed. Though Rouhani has a long record in Iranian politics, he's both a pragmatist and an insider, which means that he hasn't made many bombastic speeches other than during and after the campaign, when he called for working toward peace. And he hasn't yet entered office, which leaves observers scant material for judging him, save their own preconceived views of him and the system of which he is a part.

There's just enough moderation in Friday's quote for those who are hopeful about Rouhani to see signs of progress, while those who are apt to view his peace talk as a mere deception have just enough room to interpret his use of "occupation" to affirm their suspicions. What makes this more difficult still is that neither side appears to believe that  the world should simply wait and see. For those optimistic about Rouhani's election, the window for peace is closing and the new leader should be given credit for his concessions, which are not easy to make. For those suspicious of him, every day that goes by could bring Iran closer to a nuclear weapon and farther away from military deterrence. Hence, both sides have been in frequent conflict over Rouhani – a war of perceptions in which every quote, past statement or position paper is scrutinized for proof that he is a potential peacemaker or a mere facade.

This question of how to perceive Rouhani's motives extends well beyond Jerusalem or Tehran – all the way to Washington, which is often the intended audience of such debates and which will play a key role in mediating one of the Middle East's most dangerous conflicts. Just this week, the U.S. House has passed a new bill tightening sanctions against Iran, meant to deter Tehran from nuclear development, despite opposition from a number of lawmakers who say the sanctions could quicken the closing of a rare window for peace. Now U.S. senators will face the same argument, one based in significant degree on their perceptions of this new leader in Iran and what he may, or may not, represent.