Israeli retaliation for Palestinian atrocities seems certain. Deaglán de Bréadún, who was recently in Israel and the Occupied Territories, examines the dilemmas facing both sides locked in a spiral of violence.
No wonderYasser Arafat was in such a good mood when I met in his Ramallah fastness last week. He believes - and not without reason - that he is in a "win-win" situation. As Terence MacSwiney put it: "It is not those who can inflict the most, but those who can endure the most who will be victorious."
The Palestinian-Israeli conflict may well have reached a stage, typical in such epic confrontations, where everything seems to go right for one side, and wrong for the other. Even the mistakes and misdeeds (to say nothing of the acts of appalling terrorism such as Wednesday's outrage in Netanya) of the Palestinians at the moment do not seem to be as counter-productive as they should be, whereas the tide is running against the Israelis just now.
I was in Israel for the election of Ariel Sharon as Prime Minister. Israelis were quietly confident that "Arik" would do the business. The Palestinians had spurned the carrot offered by previous prime minister Ehud Barak but they would respond to the stick wielded by Ariel Sharon.
It hasn't worked out like that. Like many a leader before him, Sharon discovered the difference between intention in opposition and implementation in office.
He has been tough but not tough enough for the Israeli right wing. And the Palestinians are no longer cowed by superior and overwhelming force.
In my mind's eye I see the large crowd of unarmed Palestinians at a checkpoint between Jerusalem and Ramallah, taunting the heavily-armed Israeli soldiers who could at any stage decide it was necessary to shoot them. Their blood is up and their current mentality is such that the Palestinians appear to be past caring whether they live or die.
Whether or not Arafat went to the Beirut summit of the Arab League, he was on a winner. Had he gone, he would have been the hero who refused to bend the knee to demands he call off the "struggle". He stayed in the West Bank and could become the most celebrated political prisoner since Nelson Mandela.
Lloyd George said that dealing with Eamon de Valera was like trying to pick up mercury with a fork and one senses the Israelis find the same with Arafat. Man of war, man of peace or just a chameleon-like leader who reflects the prevailing mood of his people?
If the Middle East was anything so benign as a circus, Arafat would be the juggler. There are his smooth-talking ministers and spokesmen, many of them versed in the ways of diplomacy, whom he wheels out for interview on CNN or the BBC.
These could roughly be described as the "Oslo Group" who came to the fore during the peace process which brought Arafat from Tunis to Ramallah but which is now disintegrating before our eyes.
Then there is the militant wing. For all the outrages by Hamas, these are the real foot soldiers of the intifada.
Their best-known public face is Marwan Barghouti. Reminiscent of certain Sinn Féin spokesmen back home, he articulates the options in clear-cut terms: roll back the Israeli troops to the 1967 borders and you will have peace; otherwise the struggle continues.
The considered opinion of seasoned, expert observers is that the Oslo group is losing out to the militants, but Arafat sails on.
The Israelis have tried a rather crude psychological approach in attacking his headquarters and offices in the West Bank and Gaza.
Given what they have done, the Palestinian President should be haggard, a broken man pleading for surrender in reedy, whimpering tones. Instead he's laughing all the way to the international news headlines.
Despite the odium incurred with elements of world opinion by its recent invasion of the West Bank, senior Israeli people point out that no suicide bombers came out of Ramallah during the takeover, whereas previously they were running between one and four a day. The dilemma for Israeli planners is that taking the security measures needed in the short term may mean losing the battle for world opinion in the longer perspective.
Another real concern on the Israeli side is the growing Iranian role in the region. Senior Israeli experts claim to see the hand of Iran behind many terrorist actions. The ideological motivation is not a Palestinian state, side by side with Israel, but the complete destruction of the Jewish state itself.
The Americans may be obsessed with Saddam Hussein but the Israelis see Iraq as a lesser threat than Iran, though still a serious one."We are worried," an Israeli government official told me.
Whatever the difficulties and obstacles, a reasonable settlement, even with the militant wing of Arafat's movement, is considered achievable. But as Israelis see it, a holy war fuelled by Iranian money, ideology and weapons, would not be amenable to settlement and could only be resolved by complete victory for one side or the other.
The choice remains: a deal with Arafat, or no deal at all. But until the Palestinian leader sees that the advantages of calm outweigh those of conflict, he will not - probably cannot - seriously assert his authority to halt the conflict. The dilemma for Israelis was summed up by one policy adviser: "We don't know exactly what his price is."
Deaglán de Bréadún is Foreign Affairs Correspondent of The Irish Times