Gordon Brown has promised to set out "an economic road map" to build peace in the Middle East.
Speaking at the final Labour leadership hustings in London, the Chancellor promised new investment for the Palestinian territories.
Mr Brown, who takes over later this month as Prime Minister, said that he still believed that there could be a "two states" solution to the Middle East, despite the recent violence in Gaza.
However, he also emphasised the importance of tackling poverty in the Palestinian territories if there was to be a lasting settlement.
"We have got to find a way of solving the security problems so there is a period of peace where we can move forward," he said.
"I believe that investment and tackling poverty does provide a major way forward."
Mr Brown highlighted the fact that while average incomes in Israel were 20,000 US dollars (£10,144) a head, in Gaza they were just 800 US dollars (£405).
He said that the Palestinian territories were suffering from 50% unemployment and 70% poverty.
