By Matthew Davis
BBC News website, Washington
For all President George W Bush's talk of bringing democracy to the Middle East, Hamas' victory in a ballot of the Palestinian people is as awkward a result as he could have expected.
The Bush administration has made it clear it has no intention of dealing with a party that has "one foot in politics and another in terror".
So Hamas' win represents a policy dilemma for the US and an obstacle to its hopes of negotiating some form of peace in the Middle East.
Asked if such hopes were dead, Mr Bush tried his best to sound optimistic at a White House news conference.
"Peace is never dead because people want peace," he said. "The best hope for peace in the Middle East is two democracies living side by side."
But the president added: "I don't see how you can be a partner in peace if you advocate the destruction of a country as part of your platform. And I know you can't be a partner in peace if your party has got an armed wing."
Mr Bush portrayed the strong Hamas showing as more a reflection of discontent among Palestinians about the way they were being governed, rather than anger at the situation with Israel.
Focusing on the democratic value of the election, he said it was a "wake-up call" to the leadership from a people demanding "honest government".
The US is wary of talking to a group it accuses of terrorism
There may be hope that Hamas might moderate its position in some way and become involved in the political process, perhaps following the example of Sinn Fein in Northern Ireland.
Yet the US leadership is waiting for the shape of the next Palestinian government to become clear before making any significant policy decisions.
It is unclear how the election result will affect US aid to the Palestinians, which is smaller than European Union contributions, yet still significant.
The US says it has spent more than $1.7bn in the West Bank and Gaza since 1993 to combat poverty, improve infrastructure and promote good governance.
Just last December, the US government transferred $50m dollars to help bolster the Palestinian Authority.
Dennis Ross, former special envoy to the Middle East under President Clinton, told the BBC that Washington was unlikely to change its position on Hamas.
"The only way you will see the administration make an effort to stay involved is if there is a common front with the international community to insist on a set of standards that Hamas will have to meet if they are to have relations and/or be royally receiving material assistance from the outside," he said
Mr Ross added: "Hamas did not expect to win the election.
"They hoped to take over the Palestinian Authority in time, now they have to deal with the consequences of their success.
"For them to be able to govern, they are going to have to adjust their behaviour."
On Monday, Secretary of State Condoleezza Rice is due to meet in London UN, Russian and European leaders, as the so-called "Quartet" evaluates the results and tries to decide how to proceed with peacemaking efforts.
The US would like to continue to deal with Palestinian President Mahmoud Abbas - the moderate leader of Fatah - but he has been weakened by this election result.
For years, even though he was the unquestioned leader of the Palestinians, the US declined to deal with - or even have contact with - Yasser Arafat.
Under US pressure in the Reagan administration, Arafat made a statement renouncing terrorism, and the US went on to deal with him in peace efforts.
But President Bush - deciding Arafat was corrupt and linked to persistent violence against Israel - cut him off, in favour of dealing with Mr Abbas.
Some Palestinians feel the US must now respect the result of the democratic elections they had demanded. Anything else, they say, would be a sign of "double standards".