Audio Transcript:

JEB SHARP: The current quarrel between the U.S. and Israel is of great interest to Arab news consumers too. The World's Jason Margolis has more on what they are reading and hearing.

JASON MARGOLIS: Professor Makram Khoury-Machool studies the Arab media. He teaches at the British Universities of Cambridge and Hartfordshire. Khoury-Machool has been following the coverage of the U.S.-Israel spat within the Arab media. He says angry reaction about Israel's settlement building, not really that surprising. But Khoury-Machool says the Arab world isn't especially focused on Israeli actions right now.

MAKRAM KHOURY-MACHOOL: The change this time, I mean the Arab media was very much concerned this time, whether the American administration is going to change it's foreign policy towards Israel. This was the main focus rather than whether the Arab world is angry with Israel's actions. The Arab world is angry with Israel's actions anyway.

MARGOLIS: Khoury-Machool says Arab columnists are split between those who believe the Obama Administration really wants Israel to free settlements, and those who believe the Obama administration is just paying lip service to curry favor in the Arab world. To understand this schism with how Arabs are feeling about the Obama administration, you have to rewind nine months to Cairo. That's when President Obama delivered this speech to the Arab world.

PRESIDENT BARACK OBAMA: The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop.

MARGOLIS: President Obama's speech resonated hugely within the Muslim world. Michele Dunne, with the Carnegie Endowment for International Peace said the President didn't break much ground with new policies. But she says Mr. Obama's speech showed a remarkable sensitivity towards Muslims.

MICHELE DUNNE: In quoting the Koran and the raising things from Muslim history and civilization and so forth and showing that he had respect for those things that was what was remarkable for it.

MARGOLIS: But now, nine months later - -

DUNNE: There is a lot of disappointment across the Muslim world with what Obama said he would do and what has actually happened.

MARGOLIS: That leads some to suggest there really isn't that much disagreement in the Arab world. That the relationship between the Israel and the U.S. comes first, and Arab interests are an afterthought. Rami Khouri is a syndicated columnist based in Beirut.

RAMI KHOURI: Generally, people are saying well, don't be fooled. The Americans are criticizing the Israelis now, and Clinton is saying this and Obama is saying this, but in a few weeks the APEC is holding it's convention, the major Israeli lobby in the U.S. The APEC convention will bring things back to normal.

MARGOLIS: But while many Arabs expected dispute over new Israeli settlements to end in disappointment for them, Steve Crane of the Brookings Institution sees a positive side. He argues that the current U.S.- Israeli dispute may actually help improve relations between President Obama and those in the Arab world.

STEVE CRANE: He's re-engaging on an issue that's important to them. He's re-engaging on this issue of settlements which in many respects is symbolic for them of a greater American commitment to resolve, finally, this conflict.

MARGOLIS: But President Obama has to do more than just re-engage in the Palestinian - Israeli conflict, he has to win the current argument over settlements, says Carnegie's Michele Dunne.

DUNNE: If once again the Obama administration sort of backs down and accepts far less than these demands that we've now heard that Secretary of State Clinton has made of Prime Minister Netanyahu, then again it will look as though Obama takes no for an answer.

MARGOLIS: The Obama administration may have to take no for an answer. Despite attempts on both sides to minimize the diplomatic dispute, Israel says it stands behind its long held policy of building in East Jerusalem. For The World, I'm Jason Margolis.