US President George W. Bush gave a muted warning to Iran and pushed Israeli-Palestinian peace during his final State of the Union address Monday night, but focused more on Iraq than any other part of the Middle East. "Above all, know this: America will confront those who threaten our troops. We will stand by our allies, and we will defend our vital interests in the Persian Gulf," Bush said to applause from the joint session of Congress convened to hear the president's assessment of the country's health and strategy for the year ahead. He first told the Iranians that despite the lack of relations between the two countries, engagement with the United States was possible if the Islamic Republic stopped enriching uranium as the international community has demanded. "Verifiably suspend your nuclear enrichment, so negotiations can begin," he said. His words were a far cry from the rhetoric of his 2002 State of the Union, when he labeled Iran, Iraq and North Korea an "axis of evil" for seeking weapons of mass destruction and supporting terrorism. On the "Holy Land," as Bush put it, the president noted his intention of seeing a Palestinian state created by the time he leaves office. "This month in Ramallah and Jerusalem, I assured leaders from both sides that America will do, and I will do, everything we can to help them achieve a peace agreement that defines a Palestinian state by the end of this year," he said. "The time has come for a Holy Land where a democratic Israel and a democratic Palestine live side-by-side in peace." Bush called Palestinian Authority President Mahmoud Abbas "a president who recognizes that confronting terror is essential to achieving a state where his people can live in dignity and at peace with Israel." He also said Israel has leaders "who recognize that a peaceful, democratic Palestinian state will be a source of lasting security." Addressing the unpopular war in Iraq, Bush reaffirmed his commitment to the effort there. He told his "fellow Americans" that while al-Qaida had declared it won't rest, "We will not rest either. We will not rest until this enemy has been defeated. "We must do the difficult work today," he said, "so that years from now people will look back and say that this generation rose to the moment, prevailed in a tough fight and left behind a more hopeful region and a safer America." While in 2002 he spoke months after September 11, when the country had come together to oppose those who had killed thousands of Americans on US soil, Bush addressed the nation on Monday from a deeply unpopular position as crises at home and abroad have shaken his administration. Bush is also entering his last year in office, a "lame duck" in political vernacular, with his own speech overshadowed by the election race for his successor. Florida, the largest state to hold a primary to date, was due to begin voting the morning after he concluded his remarks and media attention was largely focused there.