JERUSALEM, July 2 (Douglas Hamilton, Mustafa Abu Ganiyeh, Joseph Nasr Reuters) - Whether a just resolution of the conflict between Israel and the Palestinians is close at hand or close to impossible is today -- as so often over the past two decades -- in the eye of the beholder.

Palestinian students about to graduate from high school in the West Bank and Gaza Strip, as well as in Israel where they are called Arab Israelis, paused during final exams this week to give the following snapshots of their views on the future.

Most were born in 1991, the year the Madrid Conference began a peace process that, 18 years on, has yet to yield the state desired by Palestinians or to settle other disputes with Israel.

Palestinians in the West Bank live under occupation in a poor but semi-autonomous region, ultimately controlled by the Israeli military. Arab Israelis complain of discrimination but have access to Israel's modern economy and welfare system.

In Gaza, ruled by Hamas Islamists who preach armed resistance to Israel, Palestinians live in a blockaded coastal enclave often described by symapthisers as an open-air prison, to which Israel and Egypt have the keys.

BETHLEHEM, West Bank

Seven of 10 students were pessimistic about peace.

Three said peace was inevitable, however distant, because we live in a modern, progressive world.

Mohammed Abu Sroor of Aida refugee camp said: Peace is hopeless because Israel is a Zionist state.

Margaret Za'ror of East Jerusalem, at school in Bethlehem, said: It's possible to have peace if both sides make concessions and forgive each other and forget their losses.

Would there be a viable Palestinian state in 10 years?

Six said it was not likely.

The Palestinian Authority was established nearly 20 years ago with the aim of establishing a Palestinian state, said Murad Nassar of Bethlehem. This has not happened.

But four foresaw some form of handicapped state.

Israel is talking about a demilitarised state, with limited sovereignty and no territorial contiguity in the West Bank, which is cut off from the Gaza Strip, said Margaret Za'ror.

What about the risk of another major war?

Four said any major war would involve Iran and probably the United States so it was unlikely because it could go nuclear.

There will be no major war because the Iranian elections are a catastrophe for that country and it was partly the work of American and Israeli meddling, said Mohammed Abu Sroor.

Asked if they might leave the region for good, 7 out of the 10 said they would like to study abroad where they'd have better opportunities. But they would come back.

This land is ours and it is our right and duty to stay here in our land, said Majdi Abdeh. My land and family need me.

I want to study abroad and work in the Gulf for some years. Then, I will come back and stay, said Jeryis Mansour.

ABU GHOSH, Israel

Arab Israeli students at the Abu Ghosh High School near Jerusalem, in one of the most integrated towns in Israel, were divided on the viability of Israeli-Palestinian peace.

Neama Ibrahim, 18, said: I am hopeful there will be peace because people have a basic right to live in peace. Inshallah (God willing). I am optimistic for a Palestinian state...

I have a conflict about who I am, where I am and who is my people ... I don't feel my situation is stable as an Arab living in Israel. The way Israel defines itself (as a Jewish state) is perhaps racist. But I don't want Jews to leave and I don't want Palestinians to leave. I want them to have their own states.

Yousef Jamal, 18, said: The two sides have conflicting demands that makes any solution almost impossible. But in the end there will be peace.

All feared war in the region. Almost all planned to stay except Zed Abou Kuraish, 17.

Peace between Jews and Arabs is hard to achieve because there is a struggle between two nations. There will not be a Palestinian state, he said. And there are difficult problems in Palestine itself, in the West Bank and Gaza.

I look out for my own interests. The most important thing is that I succeed in life. I'll go to China if it's in my interest, he said. In Israel, if you're good, you'll do well. and if you're bad, you won't do well. I am optimistic.

Hadil Hussein Ibrahim, 18, said: I introduce myself as a Palestinian citizen living in the state of Israel ... And I can tell you that in Israel we have good living standards.

I don't think success has anything to do with the country you're living in. It's to do with people. Because people who succeed in this country succeed because of their hard work --- be it Arabs or Jews...

But the Koran says the Israelis won't last and will be destroyed, she said. Therefore I am hopeful there will be a Palestinian state, even on the ruins of Israel.