"I strongly support a two-state solution -- a democratic Palestine based on law and justice that will live in peace and security alongside a democratic Israel," Bush told Arab leaders at the World Economic Forum of the Middle East.
Bush said Arab leaders needed to look ahead if they are to continue their economic prosperity as the world responds to the looming energy crisis.
"Over time, as the world becomes less dependent on oil, nations in the Middle East will have to build more diverse and more dynamic economies," Bush said.
Speaking on the role of woman in society, Bush said freedom is "matter of morality and of basic math" adding, "No nation that cuts off half its population from opportunities will be as productive or prosperous as it could be.
"Freedom is also the basis for a democratic system of government, which is the only fair and just ordering of society and the only way to guarantee the God-given rights of all people," he added.
Bush told Arab leaders to work together toward a prosperous future in a gesture of solidarity.
"I know that these can be trying times, but the future is in your hands and freedom and peace are within your grasp," the president said.