“I have to admire the residents of Iroquois territory for assuming that they have a right to determine where Jews lives in Jerusalem.”

Thus did Israeli government press director Daniel Seamen caustically dismiss President Obama’s opposition to Israel’s right to “natural growth” of its settlements in Arab East Jerusalem and on the West Bank.

Though Obama’s address in Cairo broke no new ground, it confirmed to the world that a new day has arrived and a sea change has taken place. The Israel-centric Middle East policy of George W. Bush is dead. And with the policy change has come rhetorical change.

With Bush, it was “axis of evil,” “you are with us or you are with the terrorists,” “regime change,” a “green light” for war on Hezbollah in Lebanon and on Hamas in Gaza, and “this war is a struggle between good and evil.”

With Obama in Cairo, it was all about “a new beginning” and “mutual respect” between the United States and an Islamic world of 1.2 billion.

Where Bush sought to isolate Syria as a state sponsor of terror, Obama has sent diplomats and is sending the U.S. military to Damascus to work together to halt al-Qaida infiltration into Iraq. Return of the Golan Heights may be back on the table.

Where Bush said Iraq’s drive for weapons of mass destruction threatened America and the world, Obama calls Iraq “a war of choice,” and re-commits to bring all U.S. combat troops home before 2012 and to seek no permanent bases there.

Where Israeli hawks push for pre-emptive U.S. strikes on Iran’s nuclear facilities, Obama says Iran “should have the right to access peaceful nuclear power if it complies with its responsibilities under the nuclear Non-Proliferation Treaty.”

As there is no hard evidence Iran has gone beyond the NPT, this points to a resolution of the nuclear issue, if Tehran can provide solid assurances it has no clandestine weapons program.

Where Bush refused to meet with Yasser Arafat or recognize Hamas’ election victory, and outsourced Mideast policy to Ariel Sharon and Ehud Olmert, Obama has confronted Bibi Netanyahu and handed Israel an ultimatum: Halt all settlement growth, now, and come back to me with your plan for a Palestinian state.

A collision that could shatter the coalitions of both Bibi and Barack now appears inevitable and imminent. Either the president or prime minister is going to have to back down.

Netanyahu was elected on solemn pledges never to negotiate with Hamas, permit a Palestinian state (“a second Hamastan”) or let Jerusalem be divided. He is committed to the “natural growth” of Jewish settlements in Judea and Samaria.

Obama has said publicly that there is to be no growth of any kind on the West Bank and all illegal outposts must come down.

There are reports that while Defense Minister Barak was in the office of National Security Adviser Gen. Jim Jones, Obama popped in for 15 minutes to tell Israel’s most decorated soldier he wants to see an Israeli plan for peace and a Palestinian state by July.

That state would necessarily have a Jerusalem enclave as its capital, as no Palestinian or Arab leader could agree to a peace that did not include part of Jerusalem, the Al Aqsa Mosque and the Dome of the Rock without putting himself in mortal peril.

Behind this clash lies a shift of perspective in Washington.

Obama is directly challenging the thesis of Israel and its lobby, AIPAC, that U.S. and Israeli interests are one and the same, that we are partners. Barack is saying that settlements are an impediment and an independent Palestinian state indispensable to peace. And even if Israel believes its interests are being subordinated and security imperiled, the United States disagrees—and the United States will prevail.

In Israel, the betting is that Barack will break Bibi because Israel cannot defy its last great friend, the lone superpower, upon whom it depends for security, weaponry and diplomatic shelter from U.N. Security Council sanctions. As Rick Wagoner of GM can tell Bibi, you take the king’s shilling, you play the king’s tune.

Indeed, Obama can make a case that he better represents the Jewish community in the United States than the Israel lobby, as he won 78 percent of the Jewish vote.

Netanyhau was outpolled by Tzipi Livni of Kadima, who is waiting in the wings.

Bibi is in a terrible box. If he defies Obama and orders new housing in the settlements, he could face rebellion at home for alienating Israeli’s indispensable ally.

If he goes along with halting settlement growth and moves to accommodate a Palestinian state with its capital in Jerusalem, how does he explain the capitulation to Likud—and to Avigdor Lieberman?

Next weekend, Iran heads to the polls, and President Ahmadinejad faces strong opposition. If the moderate Mir-Hossein Moussavi wins, the possibility of a U.S-Iranian detente rises dramatically.

For Israel and the United States, the days of wine and roses are over.