JERUSALEM — Israel, the country most on edge about Barack Obama's outreach to Muslims, had decidedly mixed reactions today to the U.S. president's speech in Cairo and its strong call for Israel to halt settlement expansion on territory the Palestinians claim for a future state.

A government official said the speech could have been worse for Israel, while a settler spokeswoman called Obama naive and out of touch with reality. A dovish lawmaker said the speech created an important opportunity for peace.

In his speech aimed at healing rifts between the U.S. and the Muslim world, Obama devoted significant time to the Israeli-Palestinian conflict. He asked Muslims to accept Israel's right to exist as a nation that came about after centuries of persecution and the Nazi genocide of 6 million Jews.

He also made an emotional plea for the right of Palestinians to live in dignity in an independent state of their own. He even used the term "Palestine," in a break from standard references to a future Palestinian state.

Israel's initial official reaction was to play down any potential rift with the Obama administration, probably to avoid exacerbating already palpable tensions between the liberal U.S. leader and Israel's new hardline prime minister, Benjamin Netanyahu.

"All in all, it's not bad. I don't think there's anything we disagree with here," said Danny Seaman, the director of Israel's Government Press Office.

"The state of Israel isn't against reconciliation," he said.

Aliza Herbst, a 56-year-old resident of the West Bank settlement of Ofra, calmly watched Obama's speech on television and when he finished said "his naivety can be dangerous."

Many Israelis feared Obama would use the stage to step up his recent criticism of Israel.

Netanyahu has refused to endorse a Palestinian state and said settlement construction will continue. Senior Israeli officials were meeting today to formulate an official reaction to Obama's comments.

Yuli Tamir, a dovish lawmaker from the centrist Labor Party, was filled with praise for Obama and his speech.

"It's one of the most important speeches ever delivered, a key speech for changing the climate in the Middle East.