JUDY WOODRUFF: And we turn to another story from Margaret Warner in Israel.
She's been exploring key issues facing both President Obama and Prime Minister Netanyahu after elections in both countries. Earlier this week, Margaret looked at the spillover of the war in Syria and the threat posed by Iran's nuclear program.
For tonight's report, she traveled to the West Bank and Gaza to examine the growing disillusionment among both Israelis and Palestinians about the prospects for peace.
MAHMOUD MAREE: When I started a little business, small business, then it started to be big.
MARGARET WARNER: Mahmoud Maree launched his furniture business in the West Bank town of Vidya 20 years ago, as a young man, just before the 1993 Oslo Accords promised a new era in Israeli-Palestinian relations.
He thought his world was changing.
MAHMOUD MAREE: And all of my customer is Israeli people, Israeli companies. I reached the top of the pyramids.
MARGARET WARNER: Times were good, with 150 employees making and selling furniture. Then came the second Palestinian intifada, or uprising, that brought suicide bombings and terror to Israel.
MAHMOUD MAREE: After the intifada, all things gone, closed, everything.
MARGARET WARNER: Thousands of shoppers from Israel used to drive up this road to take advantage of bargains in the Palestinian shops just ahead.
But after the violence of the early 2000s, the popular shopping district has become a virtual ghost town. Hundreds of miles of concrete and concertina wire now separate Israel and the West Bank, with sharp restrictions on travel between them. Shop signs in Hebrew have been papered over. Many have closed.
Maree went from 100 wholesale Israeli customers to 10.
ESSI ACHAVAN, Merchant: We used to go over there shopping on Saturdays. And that's how I met Mahmoud.
MARGARET WARNER: Israeli merchant Essi Achavan now sells Maree's furniture from his store in Tel Aviv.
ESSI ACHAVAN: Besides the business, we talk to each other every day. We ask about each other's health and about his kids and everything else.
MARGARET WARNER: But his warm feelings don't extend to most Palestinians.
ESSI ACHAVAN: If it wasn't just with the business, they don't like you very much. They take your money, and that's it. The hate that they teach them in Palestinian schools. And you could see it. You could feel it.
MARGARET WARNER: And Maree distrusts most Israelis he knows. They say they want peace.
MAHMOUD MAREE: But when they have elections, they vote for one who don't want peace, like Netanyahu. Don't want peace. He only want to take more land to make the wall more, like snake.
GHASSAN KHATIB, Bitterlemons.org: The two public opinions are splitting apart, growingly, in both Israel and Palestine.
MARGARET WARNER: Ghassan Khatib, a former Palestinian professor, former government minister and pollster, says growing numbers of Palestinians and Israelis know nothing of each other.
GHASSAN KHATIB: They don't go there. They don't go shopping from Israel. They don't go for beaches in Israel. Israel for them is only settlers and soldiers, occupying soldiers, which adds very negatively to the mutual understanding.
MARGARET WARNER: Creating mutual understanding was the idea behind Bitterlemons.org, a website Khatib co-founded with Israeli analyst Yossi Alpher. Funded by foreign donors, it was a forum for Israelis, Palestinians and Arabs to engage in dialogue online, but last fall, after 11 careers, Bitterlemons shut down.
YOSSI ALPHER, Bitterlemons.org: The demise of Bitter Lemons is a kind of metaphor for what is happening in the Middle East.
MARGARET WARNER: Alpher said donor interest faltered and some Palestinian and Arabs writers grew reluctant to contribute.
YOSSI ALPHER: There were pressures on Palestinian writers, veteran writers no longer to take part.
MARGARET WARNER: To what degree did the demise of Bitterlemons also reflect the growing distance between Israelis as a society and Palestinians as a society over the last dozen years.
YOSSI ALPHER: I think to a high degree it reflects that growing distance. The cynicism has grown, the sense of hopelessness, the sense there is not much left to talk about.
MARGARET WARNER: Two states side by side is still the goal espoused by Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas and the United States. But there have been no meaningful negotiations in five years. And the militant group Hamas running Gaza rejects them entirely.
Meanwhile, Israeli settlements in the West Bank continue to expand. And polls show public support for negotiations on a two-state solution, while still a majority, is shrinking on both sides.
GHASSAN KHATIB: The dream of an agreement for two states living side by side is less doable nowadays. I think that there is a beginning of change in the political thinking among the new generation.
3e22YOSSI ALPHER: They probably feel, as I do and as a growing number of Israelis and Palestinians does, that negotiations, even if renewed, are pointless.
MARGARET WARNER: We found those hardening attitudes among young people in two cafes just eight miles, but a world apart.
Avishai Shraga and his wife, Taire, took their new baby to Cafe Kafit. A financial news Web site writer, he was called for army duty in last November's conflict against Gaza.
AVISHAI SHRAGA, Writer: When people are attacking us, we are going to defend ourselves, and we're going to do it very determinedly, including leaving your wife in labor room and going to war.
MARGARET WARNER: At 30, the only Palestinians he's known were as a soldier on the West Bank. He thinks Netanyahu should spend his energy on problems at home, not pursuing talks with the divided Palestinian leadership.
AVISHAI SHRAGA: There's not enough room here for two states. If we give up the West Bank, Tel Aviv is going to be under fire for a long time.
MARGARET WARNER: But his wife, Taire, who works in the tourism industry, has fears, too, that, without talks, the current calm won't hold.
Do you think the status quo can last indefinitely?
TAIRE SHRAGA: Absolutely not, unfortunately. We see periods of quiet, and that's what we are in right now. But we know to look ahead and to be weary.
MARGARET WARNER: So what do you think is the alternative?
AVISHAI SHRAGA: To make the situation better for both Palestinians and Israelis. There is a lot of work to do on their side.
MARGARET WARNER: That work is being done in Ramallah, the West Bank home of the Palestinian Authority. The separation has boosted business here. High-rises dot the skyline. Shoppers jam the streets.
JACK SAADE, Jasmine Cafe: We have some nightlife in Ramallah, which is -- I'm proud of.
MARGARET WARNER: Young Palestinians flock to Jack Saade's upscale Jasmine Cafe, yet he senses frustration among young people over too few job opportunities and no clear path to statehood.
JACK SAADE: Because there is no vision, there is no light at the end of this tunnel, we don't know, that makes it more frustrating for everybody, especially the young adults.
MARGARET WARNER: But customer Rawn Assad, a 25-year-old graphic designer, says she's not frustrated.
RAWN ASSAD, Graphic Designer: Most of my generation find it is very, very hard to build a career and find a good job, but it wasn't always that way. And it is not going to stay that way forever.
MARGARET WARNER: She doesn't know many Israelis and doesn't care to.
RAWN ASSAD: I don't think any negotiation is going to go anywhere. Like, I think now we need just to stop fighting and we need to focus on ourselves.
MARGARET WARNER: So, what do you think the future is? A two-state solution or one-state solution?
RAWN ASSAD: The possibility of a two-state solution succeeding is 10 percent, because it's not going to happen.
MARGARET WARNER: But you think Israel has a right to exist here?
RAWN ASSAD: I do believe not. But it's happening. It happened. It's a fact. And we have to accept it.
MARGARET WARNER: That grudging acceptance came hard to a group of Palestinian and Israeli fishermen who tried building lives together in Gaza in the 1990s.
Chronicled in this 2005 documentary, "Troubled Water," the Israelis lived in a Gaza settlement, Dugit, and fished with Palestinians nearby. We tracked down two of them, Abu Hani still in Gaza, and Eyal Goren, now living with his wife, Tova, in a kibbutz in Southern Israel.
EYAL GOREN, Israel: It was fun. Most of the day, we spent on the beach in the hut.
TOVA GOREN, Israel: We had the expectation that it would continue like this. We thought, if peace works for us, that this is like the microcosm.
MARGARET WARNER: But then came the 2005 Israeli pullout from Gaza and rocket attacks from Gaza into Israel.
EYAL GOREN: When I came, I was a leftist. Today, I'm right-wing, real right-wing.
MARGARET WARNER: We found 62-year-old Abu Hani near his fishing hut in nearby Beit Hanoun.
Abu Hani: We used to be together, and earn money together. We were good to each other. But those wars, Israel has always wanted war.
MARGARET WARNER: Do you stay in touch with them?
Abu Hani: Never. It's finished. They say you are in Gaza and no one can come in any more.
MARGARET WARNER: Business is much worse now, says Abu Hani, since the Israeli navy keeps Palestinian boats from reaching the better fishing waters farther out.
How do you feel about Israelis? Do you blame all Israelis?
Abu Hani: No. There are some who are decent and some who are bad. The government is bad.
MARGARET WARNER: So do you think there can be peace?
Abu Hani: We pray to God for peace between us, so they won't kill me and I won't kill them.
EYAL GOREN: They can't stand us, period. They don't like us at all. As far as they're concerned, we can all die. There's no solution, none at all.
MARGARET WARNER: Attitudes making for rough waters for efforts to restart negotiations in the year to come.
JUDY WOODRUFF: You can see more reporting from Margaret and our team in the Middle East online.