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JEDDAH, Saudi Arabia, Aug 1 (Reuters) - Saudi Arabia said on Wednesday it supports a Middle East peace conference proposed by U.S. President George W. Bush, saying Israel should respond to moves towards peace.

"We welcome this initiative," Foreign Minister Saud al-Faisal said at a news conference with U.S. Secretary of State Condoleezza Rice and Defense Secretary Robert Gates.

"There is an international movement (for peace) ... Israel should respond to these pressures," the prince said.

He also said Saudi Arabia, a key U.S. ally under pressure from Washington to back the Iraqi government, would open an embassy in Baghdad for the first time since the 2003 invasion that brought down Saddam Hussein, eventually bringing Iranian-allied Shi'ite Muslims to power.

"To support the government of Iraq ... we decided to send a delegation to see how to establish our embassy in Baghdad," he said, speaking through an interpreter.

"The delegation will comprise diplomats from the foreign ministry, but I will not disclose when they will head to Iraq."

Rice welcomed the announcement. "This is something that we have encouraged ... It is an important step," she said.

The U.S. officials, who held talks with King Abdullah on Tuesday night, are on a stopover in Saudi Arabia, the world's largest oil exporter, to push for more support for the government of Iraqi Prime Minister Nuri al-Maliki.

Saudi Arabia and other Sunni Muslim-led Arab countries want Iraq to do more to include Sunni Muslims in the political process and end Iranian influence.

Western diplomats and analysts says Riyadh would resist pressure to offer major concessions to the Maliki government.

"The Iraqi government has a great responsibility ... to stop foreign interference," Saud al-Faisal said

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