There is "an extraordinary opportunity" in the coming months for Israel to normalize ties with its Arab neighbors, U.S. Secretary of State Antony Blinken said on Saturday, while also emphasizing the need for the creation of a Palestinian state.

The top U.S. diplomat said there were genuine efforts led by Arab countries to revitalize the Palestinian Authority so it can be more effective in representing the Palestinians.

"Virtually every Arab country now genuinely wants to integrate Israel into the region to normalize relations...to provide security commitments and assurances so that Israel can feel more safe," Blinken said during a panel discussion at the annual Munich Security Conference.

"And there's also, I think the imperative, that's more urgent than ever, to proceed to a Palestinian state that also ensures the security of Israel," he added.

The Biden administration has been working to secure a mega-deal that will see ties between Saudi Arabia and Israel normalize. The Kingdom and other Arab countries are seeking the creation of a Palestinian state as part of the deal.

Washington is also working to achieve a deal to secure the release of Israeli hostages kidnapped by Hamas on Oct. 7 when the group crossed the border into Israel and mounted one of the deadliest attacks on the country in decades.

While in Munich, Blinken met with Israeli President Isaac Herzog and discussed efforts to reach a hostage deal and achieve a pause in the conflict to allow more humanitarian aid to flow into Gaza, a State Department spokesman said in a statement.

The hostage deal and the humanitarian pause are seen as instrumental in helping advance conversations on a normalization deal between Saudi Arabia and Israel, which had been frozen in the immediate aftermath of the attack but have resumed in recent months.

Talks on the structure of Gaza when the war ends, and how the Palestinian Authority - which exercises limited self-rule in some areas of the occupied West Bank - needs to be reformed to potentially rule the densely populated enclave and identifying a pathway for a Palestinian state are all variables in the same equation, according to U.S. officials.