OCCUPIED JERUSALEM, 22 July — World powers at a Group of Eight summit pressed warring Israelis and Palestinians yesterday to accept outside observers and issued a warning that the deteriorating situation in the Middle East was perilous.

“The situation in the Middle East presents a grave danger,” the G-8 leaders said in a document issued separately from remarks they made later on world trouble spots. “Too many lives have already been lost. We cannot stand by while the situation deteriorates.” Hours earlier, Palestinian President Yasser Arafat accused Israel of heightening violence and called on the summit to rein in Israeli “aggression” in the West Bank and Gaza Strip. But the brief G-8 statement, an endorsement of one issued by their foreign ministers in Rome on Thursday, ducked Arafat’s specific appeal on Israel. It said third-party monitoring would serve the interests of both parties in implementing the report of a US-led commission calling for a truce and cooling-off period, followed by confidence-building moves and a resumption of peace talks.

“The cooling-off period must begin as soon as possible,” the G-8 leaders said.

Despite a relative lull in the bloodshed yesterday, an explosion in an apartment building in the West Bank city of Nablus seriously wounded a Palestinian man affiliated with the Popular Front for the Liberation of Palestine, witnesses and hospital sources said.

In an ominous sign that the fighting would not fall off soon, the Israeli Army said it had opened bureaus in nine major cities throughout the world in case it needed to call up Israelis traveling or living abroad for military service. An army spokeswoman said offices in Johannesburg, Frankfurt, Bombay, Bangkok, London, Paris, Amsterdam, Los Angeles and New York had been established to recruit reservists “in the event of a real emergency situation”.