WASHINGTON, June 9 (Reuters/Matt Spetalnick) - President Barack Obama hosted Palestinian President Mahmoud Abbas at the White House on Wednesday seeking to ensure that fallout from Israel's Gaza flotilla raid does not derail fragile US-led peace efforts.

Obama faced a difficult balancing act.

He was expected to assure Abbas of pressure on US ally Israel to loosen its Gaza blockade and let in more humanitarian supplies. At the same time, Obama will be careful to avoid further strains between Washington and the Jewish state.

Abbas' visit comes amid an international backlash against Israel after its forces boarded a Turkish aid ship bound for the Hamas-controlled Gaza Strip on May 31. Nine pro-Palestinian activists were killed.

The Palestinian leader planned to urge Obama, who has been more measured in his response to the flotilla raid than the broader international community, to take a tougher line with Israel.

President Abbas will ask for President Obama's intervention to unconditionally lift the siege on the Gaza Strip because this would be the only way to defuse tension, Nabil Abu Rdainah, a spokesman for Abbas, told Reuters.

The Obama administration has deemed unsustainable the three-year-old blockade, which Israel says is needed to stop weapons smuggling and Palestinians call collective punishment.

Expectations of a breakthrough were low for Wednesday's meeting. But having pledged to help ease Gaza's plight, Obama had no intention of sending Abbas home empty-handed.

The president and President Abbas will discuss steps to improve life for the people of Gaza, including US support for specific projects to promote economic development and greater quality of life, a senior Obama administration official said.

Obama's pledge will include a long-term strategy for progress that we will advance through consultations with the Palestinians, Israelis, Egyptians and other partners.

KEEPING FUNDS OUT OF HAMAS HANDS

There were no immediate details on the amount and type of U.S. aid to be offered for the impoverished coastal enclave, which since 2007 has been run by Hamas Islamists who seized control from Abbas's Fatah-dominated Palestinian Authority.

But any fresh infusion of funds would come with strings attached to keep it out of the hands of Hamas, which is on the US list of terrorist organizations.

In recent years, US aid to the Palestinians has been sent mostly to the West Bank, where Abbas governs, or funneled to Gaza through international agencies. Washington pledged $900 million for the Palestinians at a donors conference in 2009.

Signalling a US desire to boost Abbas's standing with his people, reporters will be allowed into the Oval Office to see the leaders together. Press coverage was barred during a tense visit in November by Israeli Prime Minister Benjamin Netanyahu, which Israeli media widely interpreted as a snub.

Despite heightened regional tensions, the Obama administration is seeking to keep alive indirect U.S.-brokered talks that have made little headway since starting in early May. Obama hopes to push the sides toward direct negotiations.

Obama's Middle East diplomacy, central to his outreach to the Muslim world, has been complicated by the flotilla incident.

Abbas's meeting with Obama will take place a week after Netanyahu canceled talks in Washington and rushed home from Canada to deal with the crisis sparked by the flotilla raid.

Netanyahu's visit had been billed as a fence-mending session to move beyond discord over Jewish settlement construction on occupied land.

Obama has little room to maneuver. With U.S. congressional elections looming in November, he must be mindful that Israel is popular with US lawmakers and voters.

Abbas also backs a UN proposal for an international probe, but the White House leans toward Israel's insistence on its own inquiry with a role for foreign experts or observers.

Abbas arrived from Turkey, a US ally that has condemned Israel's action and curtailed ties with it. Abbas has called the raid a massacre. Israel said its commandos defended themselves when attacked during the boarding.