World leaders assembled in Israel last week for the funeral of former Israeli President Shimon Peres were marking more than his passing. They were mourning the end of a dream.

Peres was a founding father of Israel, a realist who led the development of its defense industries and nuclear-weapons program. Yet those mourners knew him best for his tireless pursuit of peace with the Palestinians. As Haaretz columnist Barak Ravid wrote, "They identify Peres utterly with the peace process [and] his chief legacy of the last 25 years - the [1993] Oslo Accord and the two-state solution."

As foreign minister, Peres won the 1994 Nobel Peace Prize - along with Israeli Prime Minister Yitzhak Rabin and Palestinian leader Yasir Arafat - for godfathering the accord that was supposed to lead to a Palestinian state alongside Israel. The Oslo process died long ago (more on that below), yet Peres remained a symbol for Israelis who clung to the idea for both moral and security reasons.

The torch has already passed to a new generation of Israeli leaders who opposed "Oslo" from the get-go - and thought Peres was a naïve dreamer. Yet none has produced a realistic plan to resolve the dilemma that propelled Peres' dream.

Peres knew the status quo on the West Bank and Gaza was not sustainable for two basic reasons. First, the Israeli leader didn't believe Jews should occupy another people. Second, keeping Gaza and the West Bank would mean that disenfranchised Palestinians under Israeli control would eventually outnumber the Jewish population, transforming Israel into a nondemocratic state.

In other words, Israel had two choices: Give Palestinians the vote, leading to one state with an Arab majority, or negotiate a separation - a two-state solution.

Moreover, Peres believed the Oslo process might produce a new Middle East that included peace with Israel's neighbors. Indeed, after the 1993 Oslo signing, several Arab states began to make overtures to Israel. A formal peace was negotiated with Jordan, and Israeli representation was established in Morocco, Oman, Qatar, Mauritania, and Tunisia.

Even more impressive, in 2002 the Arab League endorsed an Arab peace initiative that called for normal relations with Israel if a Palestinian state was established. The language was imperfect, but the opportunity was enormous. By then, however, Oslo had collapsed and a wave of Palestinian terrorist attacks was ongoing. A new Israeli government ignored the Arab peace plan.

Why did the Oslo process fail? One main reason: Palestinian leaders rejected several major opportunities when Israel offered to return most of the West Bank. Arafat didn't have the courage (or the intent?) to make the final compromises; current Palestinian Authority President Mahmoud Abbas had the intent, but was too weak to do so. (Arafat also believed in using terror as a tool, which destroyed ordinary Israelis' faith in the negotiating process.)

Yet Israel, too, dropped the ball. Ordinary Palestinians lost faith in the Oslo process as Jewish settlements expanded across the West Bank during peace negotiations. The growth of settlements and settler roads that crisscrossed the West Bank convinced Palestinians - and much of the world - that Israel wasn't serious about future withdrawal.

Now Shimon Peres is gone, but the demographic rationale for his dream remains.

Permanent control over millions of disenfranchised Palestinians is unsustainable. (Despite the 2005 pullback from Gaza, Israel still controls the entry to, exit from, and borders of that forlorn sand spit.) The status quo will surely lead to renewed violence.

So what is the new vision that can replace the Peres dream? So far there is none.

A new generation of Israeli leaders insists settlements are here to stay - and grow - on the West Bank. Prime Minister Benjamin Netanyahu, who opposed Oslo, pays lip service to a two-state solution but appoints cabinet ministers who call for annexing the bulk of the West Bank.

Nearly 100 Jewish settlement outposts, illegal under Israeli law, remain in place and are growing, linking up much larger settlements and often impinging on Palestinian farmland. They will soon rule out any contiguous Palestinian entity for good.

I spoke with the Israeli consul general in New York City, Dani Dayan, a former leader of the settlement movement, and asked how he envisioned the future: "The alternative to two states is not a one-state solution," he says. "Israel won't accept a state with a Palestinian majority. [It] won't get into that trap."

Dayan talks of a status quo plus. He calls it "peaceful nonreconciliation," meaning better living conditions for the Palestinians in the West Bank, including freedom of movement and freedom to work inside Israel. (At present, West Bankers' truncated economy and limited movement leave them largely dependent on international aid.) He argues that it is impossible to stop settlements from expanding across Judea and Samaria - Israel terminology for the West Bank.

That formula seems pretty unrealistic. Without a political future, and with expanding settler encroachment, a status quo plus won't win over Palestinians. Nor is it likely to last: Any hint of resistance will lead to a crackdown.

If Peres were alive and healthy, my guess is he would advocate coordination with other Arab states on the Palestinian issue. Many of those states are already cooperating with Israel against ISIS. They are in no rush to see the emergence of a weak new Palestinian state during the current Mideast chaos, but they don't want the peace process to die.

There are steps that could be taken to give Palestinians hope for the future and prevent a return of Palestinian violence, prime among them curbing settlement expansion.

As Haaretz's Ravid wrote: "No Arab country today is demanding that he sign an Oslo accord or withdraw from the territories tomorrow. To create a new Middle East for Israel, Netanyahu would only have to take relatively modest steps, like freezing settlement construction" or trying to revive the Arab peace initiative.

Shimon Peres is gone, but it's not naive to seek to salvage his dream.