False propaganda?

This is a bizarre speech from Tony Blair. He is saying that, among other things, the question of Palestine needs to be addressed, indeed solved, in order to facilitate an Anglo-American withdrawal from Iraq. See this from the Guardian:

"A major part of the answer to Iraq lies not in Iraq itself, but outside it, in the whole region where the same forces are at work, where the extremism flourishes with a propaganda that may be - indeed is - totally false, but is none the less attractive to much of the Arab street."

He argued: "We should start with Israel-Palestine. That is the core. We should then make progress on Lebanon. We should unite all Arab and Muslim voices behind a push for peace in those countries, but also in Iraq."

So what false propaganda is this serial fantasist referring to? What false propaganda is so powerful that it can mobilise people against some of the most powerful forces on earth? I'm not sure if Reverend Blair addresses that one.