Despite the promises of the Obama administration, the peace process in the Middle East appears to be in a profound crisis. The reconciliation talks between Fatah and Hamas ended in scandal, and Secretary of State Hilary Clinton’s endorsement of Netanyahu's settlement policies caused a political earthquake in the West Bank.  The hopes for peace are facing setbacks on all fronts: from Arab riots in Jerusalem last month to Hamas and Hezbollah's poorly concealed weapons stockpiling and Iran’s failure to accept the most recent IAEA-backed proposal for dealing with its nuclear program.

After the latest round of Egyptian-brokered Palestinian reconciliation talks ended without agreement in Cairo last month, Palestinian Authority (PA) president Mahmoud Abbas called presidential and parliamentary elections in all the territories on 24 January. In Gaza, Hamas reacted furiously, and proclaimed the reconciliation talks frozen. American foreign policy reacted with a sudden turn toward Israel. During her visit in Jerusalem a week ago, Secretary of State Clinton praised Netanyahu’s partial freeze of settlement expansion as an ‘unprecedented’ concession and called on the Palestinians to start negotiations without preconditions.

Her statements departed sharply from previous American pressure on Israel to halt all settlement construction, sending shockwaves across Ramalla and the Arab world. Abbas, who enjoys the support of the West, announced that he plans to retire from politics and will not run in the elections in January. Such a move would torpedo the peace process, at least in the foreseeable future. Despite suggestions that he is bluffing and the enormous pressure put on him by the international community and his own party, he has remained resolute.

His attitude betrays a profound frustration with the course of the peace process, a frustration that is shared by many of his peers. Last week, his chief negotiator, Saeb Erekat, suggested publicly that, in the context of lack of progress in the peace talks, it may be time for the Palestinians to reconsider the two-state solution as a viable road ahead. This would put an abrupt end to the current peace process, based on a two-state roadmap, and transform the conflict into a civil rights struggle for Palestinian emancipation within Israeli society. It would pose a demographic challenge to Israelis concerned to uphold the Jewish character of the state of Israel.

Such threats were also articulated by other senior PA officials, and were picked up on by the Israeli opposition, with Shaul Mofaz, a former Israeli defence minister unveiling his own peace plan. He called for the immediate creation of a Palestinian state with temporary borders and a commitment to rapidly negotiate its final borders. It is not clear, however, that the suggestions of the opposition are any better a direction to take the peace process, since the PA is, according to varied analyses, considering abdicating its authority, declaring independence on 1967 borders (including East Jerusalem) and applying for UN membership. During the last few days Israeli media reported that PA prime minister, independent technocrat Salam Fayyad, attempted to reach a secret understanding with Obama on the issue. Such a development would also destroy the peace process, as it would nullify all previous understandings, and the recognition of the new state by the UN would only legally sanction a state of war between it and Israel.

Against this background of confusion and anticipation, all that remains consistent is a sense of fatigue and frustration on all sides, accompanied by rapid rearming and threats of war on several fronts. The Israeli-Palestinian peace process cannot be separated from the larger realities of the middle east, including the perpetual political crisis in Lebanon, Syrian interests, and the confrontation between Iran and the West. Israeli military intelligence announced only recently that Hamas in Gaza had carried out a test with an Iranian missile that could reach Tel Aviv. The prospect is understandably traumatic to the people of Israel, and some analysts interpreted the announcement as part of the preparation of the public opinion for another incursion into the Gaza Strip.

Moreover, last Wednesday Israeli special marine forces intercepted a cargo ship carrying hundreds of tons of weapons, ostensibly for Hezbollah in Lebanon. The delivery would have been enough for the terrorist organization to fight Israel for a month, pundits estimated, and the discovery of such a large shipment likely indicates preparations for another bout with Israel. Meanwhile, an anonymous Hezbollah commander, cited by British newspaper The Observer, claimed war was expected by next spring. Hezbollah's traditional role as an Iranian proxy should not be overlooked, since war between it and Israel may well accompany a US or Israeli strike against Iranian nuclear installations.

Finally, the Iranian crisis has also provoked strong expectations. Last week, Iranian negotiators sent mixed signals and a veiled rejection in response to the latest IAEA offer, namely that 75% of Iranian low-grade uranium be transferred to Russia and France for enrichment. The original IAEA deadline expired over two weeks ago. Analysts at STRATFOR pointed out that the US may already be preparing for war, having initiated a procedure to unblock the Strategic Petroleum Reserve, and that the large joint US-Israeli air-defense exercise, ‘Juniper Cobra 10’, could be a cover for additional preparations. In the last few months, and specifically since the disputed presidential elections in Iran this summer, US rhetoric against Iran has hardened, and high-ranking administration officials have started to say that all options are on the table, including a military strike.  The brilliantly executed and widely announced Israeli operation (coordinated with the US) to capture the Hezbollah-destined arms ship could be interpreted as another move to prepare the middle eastern theatre for war.

The international community is still anxiously awaiting Iran’s final answer; even Russian president Dmitri Medvedev—one of the most benignly predisposed toward Iran among global leaders—announced that he cannot rule out sanctions given the current situation. The cooperation of Russia and China would be crucial for the execution of sanctions, but most analysts agree that the effect of sanctions on Iran would be limited at best. In the absence of other options, the ghost of war looms over all levels of the peace process.