WASHINGTON, March 7 (Reuters) - The White House on Friday urged Israel and the Palestinians to stick with U.S.-backed peace efforts despite a shooting attack in Jerusalem that killed eight students at a Jewish religious school.

"The most important thing is that the peace process continue and that the parties are committed to it," White House spokesman Tony Fratto told reporters.

Thursday's attack by a Palestinian gunman dealt another blow to U.S. President George W. Bush's bid for a peace deal before he leaves office in January 2009, a goal already beset by deep skepticism and persistent violence.

Condemning the deadliest attack in Israel in two years, Bush said earlier that the United States stood firmly with the Jewish state, Washington's close ally.

Asked whether the White House was disappointed by the U.N. Security Council's failure to condemn the assault, Fratto said, "There's nothing to explain that an attack of this nature ... deserves anything less than condemnation."

"It was extremely disheartening to see people in the streets in Gaza and elsewhere celebrating. That was fairly disgusting actually," he added.

The attack was greeted with celebrations in Hamas-controlled Gaza, where an Israeli offensive that ended on Monday killed more than 120 Palestinians, about half of them civilians. Israel said its objective had been to halt cross-border rocket fire from Gaza.

Israel said peace talks would continue with Palestinian President Mahmoud Abbas, who denounced Thursday's attack. (Reporting by Matt Spetalnick, editing by Jackie Frank)

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