WASHINGTON — Secretary of State-designate Hillary Rodham Clinton called Tuesday for a "smart power" strategy in the Middle East that goes beyond the Israeli-Palestinian conflict to address other pressing issues like Iran's nuclear program.

While offering no specific new peace proposal, Clinton spoke confidently of President-elect Barack Obama's intentions to renew American leadership in the world and to strengthen U.S. diplomacy.

"As intractable as the Middle East's problems may seem and many presidents, including my husband, have spent years trying to help work out a resolution, we cannot give up on peace," she told her confirmation hearing before the Senate Foreign Relations Committee. "The President-elect and I understand and are deeply sympathetic to Israel's desire to defend itself under the current conditions, and to be free of shelling by Hamas rockets."

"However, we have also been reminded of the tragic humanitarian costs of conflict in the Middle East, and pained by the suffering of Palestinian and Israeli civilians," she said. "This must only increase our determination to seek a just and lasting peace agreement that brings real security to Israel; normal and positive relations with its neighbors; and independence, economic progress, and security to the Palestinians in their own state."

The panel's ranking Republican, Sen. Richard Lugar, praised Clinton, calling her "the epitome of a big leaguer" who is fully qualified for the job and whose presence at the State Department could open new opportunities for American diplomacy, including the possibility of improving the United States' image in the world.

But Lugar also raised questions about the issue of former President Bill Clinton's fundraising work and its relation to her wife's new post. Lugar said that the only way for Clinton to avoid a potential conflict of interest due to her husband's charity is to forswear any new foreign contributions. The Indiana senator said the situation poses a "unique complication" that requires "great care and transparency."

"The Clinton Foundation exists as a temptation for any foreign entity or government that believes it could curry favor through a donation," he said. "It also sets up potential perception problems with any action taken by the secretary of state in relation to foreign givers or their countries."

Sen. John Kerry, D-Mass., the new chairman of the committee, pressed Clinton on whether Obama sees a nuclear-armed Iran as unacceptable at any cost, or merely undesirable.

Clinton responded: "The president-elect has said repeatedly it is unacceptable. It is going to be United States policy to pursue diplomacy — with all of its (tools) — to do everything we can to prevent Iran from becoming a nuclear weapon state. As I also said, no option is off the table."