JERUSALEM — Prime Minister Shimon Peres says the burgeoning Israeli economy offers hope for the region's future.

Peres made the comments to some 700 Israel Bonds supporters who arrived in Israel late last month to take part in the organization's Jerusalem 3000 International Delegation.

"I do believe there will be a new Middle East," Peres said. "We are now in a transitional period, facing all the dangers and paying all the costs for having a different Middle East — a Middle East of peace."

The Israel Bonds mission, aimed at underscoring the organization's commitment to Israel's development in general and Jerusalem in particular, took on an added dimension as Israel's conflict in southern Lebanon with Hezbollah militants intensified during the group's visit.

David Hermelin, international chairman of Israel Bonds, said there had been a "few" cancellations due to the latest series of events.

Jerusalem Mayor Ehud Olmert, who addressed the group during a dinner honoring 25 families that contributed to Israeli life and institutions, said, "The fact that you all came at this time is as important as anything else you do for the state of Israel and Israel Bonds."

Peres, the keynote speaker at the awards dinner, said there is reason for optimism.

"In spite of initial doubts, the Palestinian Authority is engaged in ending terrorism. It is sealing mosques, arresting activists, searching for arms, even killing some dangerous terrorists."

The peace process, he added, is "not complete or perfect, but it is revolutionary in nature."

Peres pointed to his recent visit to the Persian Gulf nations of Oman and Qatar, where he recalled seeing "military bands playing `Hatikvah' and the Israeli flag waving."

"This was in my eyes a new Middle East," he said.

Also, "Israel's economy has changed dramatically" as a result of the new political climate.

"Once important companies in the U.S. and Europe learned that Israel is leading the peace process, a great deal of investment has come in.

"The country's GNP has almost doubled in the past four years and personal income has jumped from $11,000 to $16,500," the prime minister said.

The members of the Israel Bonds mission will seek to convey Peres' optimistic message upon their return home, Hermelin said.

"We will be telling Jews that they should be here, especially this year, to demonstrate our solidarity and unity with Israel and the city of Jerusalem.

"Israel has made tremendous steps toward peace, and this should be reflected in tourism," Hermelin said.