The UK must fundamentally rethink its approach to the Middle East and potentially distance itself from the United States under the "mercurial and unpredictable" Donald Trump, peers have said.
The British Government should support the Iran nuclear deal, loathed by the Trump White House, and seriously consider recognising Palestine as a state in order to boost the Middle East peace process, the report said.
Mr Trump's US administration "has the potential to destabilise further the region", the House of Lords International Relations Committee (IRC) warned.
On Iran and the Israel-Palestine situation, where Mr Trump has abandoned the long-standing commitment to a two-state solution, the report said "the US president has taken positions that are unconstructive and could even escalate conflict".
"The mercurial and unpredictable nature of policy-making by President Trump has made it challenging for the UK government to influence US foreign policy so far, a challenge that is not likely to ease," the committee said.
In a wide-ranging report on the region the peers, led by Tory former Foreign Office minister Lord Howell of Guildford, criticised the UK's response to the crisis in Syria.
British "confusion and disarray" over Syria was a reflection of the contradictions in international policy on president Bashar Assad's regime, the report said.
"The objective of displacing Assad, as a prerequisite of any settlement, with the current means and policy, has proved unachievable.
"Despite the chemical attack and the recent escalation of military conflict Assad, with Russian support, remains in power.
"There are no good options available in Syria but the recent chemical attack, the urgency of the humanitarian crisis, with the potential to destabilise the EU and countries of the Middle East with refugees, requires the UK, and international community, to redouble its efforts to achieve a negotiated solution."
The peers also called for the Government to take a tougher line with Saudi Arabia over its actions in Yemen, including the possibility of suspending some arms exports as a last resort.
There was a "considerable degree of public concern" about British-supplied weapons being used against civilians in Yemen and relying on assurances from the Saudis was "not an adequate way" of implementing obligations under the international Arms Trade Treaty.
"We recognise the importance of arms sales to the UK economy and the Gulf. Arms sales, however, must take place with regard for international obligations," the report said.
"The Government must demonstrate that its private diplomacy is working.
"If not, it should speak out clearly at the UN, within the Human Rights Council, condemning violations, intentional or not, in clear terms.
"Finally, as a last resort, we recommend that the UK should send a political signal, for instance, by suspending some key export licences, where there is a risk that they could be used in violation of international humanitarian law in Yemen."
The peers recommended encouraging links with youngsters from the region, including by encouraging them to study in the UK.
The committee recommended removing foreign students from net migration calculations, a policy resisted by Theresa May despite support for such a move within her Cabinet.
Committee chairman Lord Howell said: "The Middle East has changed and UK policy in the region must respond to that.
"As the UK prepares to leave the EU, and we have a new and uncertain American policy in the region, we cannot assume our strategies of the past will suffice.
"We need a new UK Middle East strategy and set of policies that reflect the new reality in the region.
"We can no longer assume America will set the tone for the West's relationship with the Middle East and the UK must give serious thought to how our own approach will need to change.
"One thing is certain: the UK cannot disengage from the Middle East.
"What happens there affects us and will continue to do so.
"From inward investment to the UK, the impact of refugees from the region and our continuing reliance on gas and oil exports, our interests will continue to be intertwined with those of the region and the Government must ensure it has the right plan for our relationship with it."
A Foreign Office spokesman said: "The Middle East remains a foreign policy priority and the UK will continue to work with international partners to achieve security and prosperity.
"The next Government will respond to the IRC's report in due course."