ISRAEL stalled the United States-brokered Middle East peace process on yesterday, saying it needed more time to study the proposal for a peace conference that Syria and Jordan have agreed to attend.US Secretary of State James Baker III left Jerusalem after two rounds of talks saying he had "great hope" that Israel would seize what he called "a moment of historic opportunity" by coming to the conference he is planning. He said Israeli Premier Yitzhak Shamir had promised him a reply "shortly" but said he had set no deadline for a decision. Israeli officials said they wanted time to evaluate Syrian President Hafez al-Assad's recent letter to President Bush, in which the Syrians agreed for the first time to direct negotiations with Israel without preconditions, according to US officials. Mr. Baker said he had explained that letter to Mr. Shamir, Defense Minister Moshe Arens, and Foreign Minister David Levy "in considerable detail" on Monday, and the premier told the Cabinet later that the Syrian leader had made a "revolutionary change" in his attitudes to Israel, according to Israel Radio. Although Baker is clearly keen for a quick and positive reply to his proposal, one Israeli official said, "It took Assad five weeks to write his letter. We must be allowed a few days to read it." Shamir's caution appears the only remaining obstacle to a peace conference setting Israel across a negotiating table for the first time from its neighbors, Syria, Jordan, and Lebanon, in a bid to reach an overall solution to the Arab-Israeli conflict. The US proposal, Baker explained yesterday, "contemplates a peace conference that will launch direct bilateral negotiations" between Israel and her Arab neighbors and between Israel and the Palestinians. The direct talks, he said, should start "a very short period of time" after the inaugural conference, co-chaired by the US and Soviets. "If this conference happens, the terms of reference will be to achieve a comprehensive settlement of the Arab-Israeli dispute based on UN Resolutions 242 and 338," Baker said. Those resolutions are generally understood to offer a land-for-peace formula that Shamir's government has rejected. Baker acknowledged that "there are different interpretations of what 242 and 338 mean and require." This proposal is the same one that Shamir rejected when President Bush sent it to him and Arab leaders five weeks ago, but the Israeli authorities have been forced to reconsider their position by Syria's unexpected decision to accept it. At the time, Israel refused to allow a UN observer to attend the opening peace conference, complaining that the world body is biased against Israel, and said it could not agree that the conference might reconvene at some stage to review progress in bilateral negotiations. These procedural objections are growing increasingly hard to sustain, however, in the face of concerted opposition from the US and Arab countries. As the Israeli leadership pondered its options, Baker left two senior aides behind in Jerusalem "to answer any questions the Israelis might have," as he put it. One of the thorniest unresolved questions is the makeup of a Palestinian delegation to talks with Israel on the future of the occupied West Bank and Gaza Strip. The Israelis are insisting on a right to veto proposed Palestinian representatives and say they will talk to no one either from East Jerusalem, which they consider part of the state of Israel, or from outside the occupied territories. Bassam Abu Sharif, an adviser to the Palestine Liberation Organization chief Yasser Arafat, said Sunday that while the PLO no longer insisted on attending the conference, delegates should come from both inside and outside the territories. Egyptian President Hosni Mubarak said the same thing last week in Damascus. After meeting Baker on Sunday night, Palestinian leader Faisal Husseini said he had "demanded that the Palestinian delegation to the peace conference include delegates from East Jerusalem," and added that there would have to be full agreement with the US secretary of state. While there has been no final decision, Palestinians are widely expected to attend the conference as part of the Jordanian delegation. King Hussein of Jordan said Sunday that was "in touch with the Palestinians, our brethren, to look at the possibility of ... the umbrella of a joint Palestinian-Jordanian delegation, and I hope we will see some progress along that track." It was over the issue of Palestinian representation that the Israeli government fell last year. But Shamir is not immediately at risk of a government crisis even if he infuriates his extreme right-wing coalition partners by agreeing to the US proposal. The Knesset (Israel's parliament) goes into summer recess on Thursday for two months, protecting the premier until mid-September from any vote of no confidence that the small parties in the coalition government might be tempted to call in order to block any peace talks. Under heavy international pressure to attend the peace conference, Shamir may have taken this domestic consideration into account when he asked for a few days before responding, analysts here suggest.