Andrea Mitchell: This morning, I sat exclusively with Jordan’s King Abdullah, about the escalating [US] conflict [with Iran] and the stalemate over Middle East peace between Israel and the Palestinians.

King Abdullah II: We have had our issues and challenges with Iran. And again for us, you know, the attacks on Saudi Arabia is of tremendous importance to Jordan.

We have an outstanding relationship with the Saudis. We are committed to their defense. Having said that, I think many of us over the past six months, if not more, have been trying to caution escalation and calm things down. And relatively that's happened across the summer.

Obviously the attack on Aramco has upped the ante. And this is a very important week in New York, where I think all of us are trying to figure out how to step away from the brink of war.

Mitchell: The Wall Street Journal had a report that it's not that clear to many experts that it was Iran. Do you think it absolutely was Iran that launched these attacks?

King Abdullah II: The reports that I've gotten, the type of weaponry, drones and missiles that were used, definitely a state actor, maybe using non-state actors is probably the politest way of saying it.

Mitchell: Proxies.

King Abdullah II: So, I think we all believe that we know who the culprit is. Why did it get to this level, and now can we calm things down and walk away from stupidity, I guess is the way to describe it.

Andrea Mitchell: Do you think diplomacy is still possible? And should the president of the United States meet with President Rouhani if that could be worked out?

King Abdullah II: Well, again, if you're going to meet, you want to meet to be able to achieve something. So, you know, the president would be in a far better position than any of us to decide whether or not that's a valid way of going. I've always believed, as His late Majesty, King Hussein did, that diplomacy, dialogue, reaching out to the other is the only way to go. Because what is the alternative? The alternative is violence. And we've all learned the hard way in our part of the world that wars are really easy to get into and almost impossible to get out of.

Mitchell: The U.S. has a maximum pressure campaign and recently sanctioned only days ago the Central Bank of Iran. How does Iran now react, when it is being squeezed with the toughest sanctions on any country in the world right now?

King Abdullah II: So, again I think one has to be careful, that when you push somebody in a corner where they have nothing else to lose, that creates its own set of problems. But I think maybe if I take a step back, I always try to explain the challenges of Iran is that they tend to gives themselves an A plus for foreign policy, i.e. their ability to affect issues in Iraq and Syria, Lebanon through Hezbollah, Yemen, but kind of give themselves a C minus for internal diplomacy.

We know that they haven't been able to meet salaries for most of the citizens. I think people are very frustrated inside that country. But any country faced with an external challenge is going to rally around the flag. So, again I think we have to be smart on what is the aim and what is the strategy that we can all agree with, as part of the coalition forces, to make sure that Iran take a step back and we can calm tensions in the Gulf.

Mitchell: There was an independent Pentagon report last month that said that ISIS is resurging in Iraq and Syria since the US withdrawal of most of our troops. And that even though there's no ISIS territory or caliphate, it is now operating virtually and raising the ISIS flag in Al Hol; this is a direct threat to you and—

King Abdullah II: Well, I think from a security border point of view, we’ve fought ISIS on two of our borders, Syria and Iraq, for a while. I don't see it's—we're not worried about that. But you're absolutely right that ISIS, especially in to get technical, the Syrian campaign over the past year pushing them out of Syria into the southern Euphrates, they were being pushed into western Iraq.

And this is one of the reasons why Jordan and Egypt have reached out to the Iraqis for better coordination. We've got to keep in mind that as we're dealing with the Syrian regime, and there was a major game-changer today where I think, we're moving to more constitutional issues to get Syria moved into the right direction. We’ve got to remember that there's still two stories in Syria: how do we deal with the regime, and how do we move society on? But the war against terror not only in Syria but into western Iraq.

Due to maybe concentration on the peace process, we've seen it in the south the vacuum that's been created there because coalition forces are no longer engaged. There has been a resurgence of ISIS.

We are all aware of this. We are coordinating with each other. But I think we still need to do a little bit more and for the next six months, if we don't keep our eye on the ball in western Iraq and Syria, then we're just actually giving the narrative and the ability for ISIS to re-establish itself.

Mitchell: We've had so far no result from the Israeli election. And it could be they have another, a third election if they can't form a government. Is this a critical moment where the two-state solution is, some fear, all but dead because of both U.S. and Israeli policies. The Palestinians have been shut out of the process. Jerusalem is now the capital-no longer a negotiating point for a final solution. So, where do we stand now given how supportive the U.S. has been of Netanyahu's policies and how this has shut out the Palestinians from any role in diplomacy?

King Abdullah II: I really don't think, but again it's up to the Israelis whether they'll go for another round of elections. I think the president of Israel has a tremendous task of seeing which government he can ask to be formed. And the second that happens and I think all of us, and I'm saying all of us members of our region, but the international community, will all jump onboard to say: can we focus back to what most of us believe the only solution is the two-state solution?

If it's a one-state solution, as you alluded to, then we are talking about an apartheid future for Israel, which I think would be a catastrophe to all of us. So we're standing by in the wings, seeing how we can help. And we just have to see what happens in the next couple of weeks.

Mitchell: When you hear talk of Israel annexing the West Bank, what is your reaction?

King Abdullah II: Well again, I do take a pinch of salt in electioneering. But a statement like that does not help at all because what you do is then hand over the narrative to the worst people in our neighborhood. And we that want peace, want to be able to move forward, tend to be more isolated.

If the policy is to annex the West Bank, then that is going to have a major impact on the Israeli-Jordanian relationship, and also on the Egyptian-Israeli relationship because we are the two only Arab countries that have peace with Israel. But if there's a box that's being ticked on a certain government getting everything that it wants, without giving anything in return, what is the future? Where are we going to go unless we can get Israelis and Palestinians to come together, to live together, to be sort of the message for the future? And at the moment, that's at jeopardy.

So if we're talking about an apartheid Israel, with a law that's different for Jews and different for Christians and Muslims, that’s going to continue to add fuel to disruption in the Middle East. And it sort of—the mind boggles when that statement came up.

Mitchell: Speaking of crises, the burden on Jordan, on the Kingdom of the refugees from Syria and other refugees, the burden on your economy, and the continuing, of 700,000 Syrians alone refugees in your country is extraordinary.

King Abdullah II: It's tough. It's the equivalent of 60 million Canadians just coming across the border in a period of two or three years. Our second biggest city at the height of the refugee crisis was the size of Chicago, and that was the refugee camp. We have gotten 63% of what we need to look after just the Syrian refugees, and this year only about 6%.

So the problem is, there's been a tremendous strain on the economy of Jordan and on the Jordanian people. I think we did the right thing because these were people that were escaping violence and hatred. But it's been immensely tough.

We're working with the IMF and the World Bank to slowly bring Jordan back into some breathing space and try to create growth. But it's been an immense challenge for us to be able to do that.

Mitchell: King Abdullah is going to be addressing the United Nations this week as he continues to push for diplomacy rather than a military option toward Iran.