GAZA CITY, ISRAELI OCCUPIED TERRITORTY — WITH so much attention being paid to Israeli response to United States peace efforts, it's easy to forget that opposition to the plan runs deep in places like the Gaza Strip.Waiting in the wings for the peace process to fail are Gaza's Islamic fundamentalists, an unpredictable part of the Palestinian equation. "We believe that this is not a suitable time for solving our problem," says Mahmood Zahar, a surgeon here. "The Arab side is very weak and the policy of the American master is prevailing." Dr. Zahar, an Islamic fundamentalist, has been jailed by the Israelis for activities in the outlawed Hamas movement. He denies a leadership role in the organization, which wants any future Palestinian state to be Islamic in nature. Hamas competes here and in the West Bank with the Palestine Liberation Organization (PLO) for the loyalty of most Palestinians. Its strength is disputed and often downplayed by secular and non- Muslim Palestinians. Hamas's power base is Gaza, where more than 95 percent of the 700,000 residents are Muslim. The squalor of the area's eight refugee camps serves as a breeding ground for the empowering message of the mosque. The local rivalry between Hamas and the secular PLO is intense. Both sides have agreed to test their strength in upcoming elections for the Gaza Chamber of Commerce, the first since Israel seized the 87-square-mile coastal strip from Egypt in 1967. Neither side is optimistic that Israel will cede occupied Arab land in exchange for peace, as envisioned by the US, let alone sanction a state for Palestinians in the West Bank and Gaza. But PLO supporters - aware of that organization's weakened position since backing vanquished Iraqi leader Saddam Hussein in the Gulf war - are more inclined to give the peace process a chance. And that suits the fundamentalists just fine. "PLO supporters actually believe in the peace process as the suitable solution for our problems," Zahar said during an interview at the decaying Islamic University, closed by the military authorities at the beginning of the 44-month-old Palestinian uprising, or intifada. "But from the Islamic point of view, supported by the majority of the people, we believe the PLO will fail. And this will reflect positively on us." PLO supporters in Gaza have no illusions about the American initiative. They, too, see it as biased in favor of Israel, which is demanding the right to choose Palestinian negotiators and refusing to stop settlement activity or part with any occupied land, especially East Jerusalem. Though it appears flawed to some here, the American initiative at least offers Palestinians a chance to win concessions from the Israelis. "We know the Israelis are stronger," explains Zakariya al-Agha, one of three PLO supporters and the only Gazan to meet with US Secretary of State James Baker III in Jerusalem last week. "They occupy our land and can say at any time, 'We don't want to do this, we don't want to leave this land. Mr. Agha says Palestinians want the peace process to succeed, but he fears Israeli demands are likely to doom it. "The people of Gaza are looking for a peaceful settlement, but we can't enter this process at any price," he says. Hamas will not be an obstacle to peace, he adds, "if they feel something positive will be obtained." "Nothing will be achieved by today's diplomatic efforts," insists Atif Adwan, another fundamentalist. "Let the PLO try, and when they fail, it will be a lesson to our people." Israel will not yield to Palestinian demands until Islamic forces sweep away the region's secular governments and bring tremendous pressure to bear on the Jewish state, the fundamentalists say. "Sooner or later, these regimes will be eliminated. We believe that time is part of the medicine," Zahar predicts.