On the horizon, shimmering like some heavenly ideal, is a grand bargain to end the war in Gaza, establish an independent Palestinian state, and stabilize the Middle East.

Also on the horizon, blazing like an infernal nightmare, is the prospect of an escalation of the current war in Gaza and the spread of destabilizing violence to every corner of the Middle East.

The direction that the region takes could be determined by a feat of imaginative diplomacy. Or an act of murderous stupidity.

Which will it be?

The Widening War

The United States still maintains 40,000 troops across dozens of military bases in the Middle East. Since Hamas attacked Israel on October 7 and Israel invaded Gaza in response, these U.S. facilities and allied forces have sustained over 160 attacks. A number of militias in the region have demonstrated their solidarity with Hamas by attacking Israel across the Lebanese border (Hezbollah), U.S., British, and Israeli ships in the Red Sea (Houthis), and U.S. bases in the region (Iran-allied militias in Iraq and Syria).

Last month, an attack on one such base, Tower 22 in Jordan, left three Americans dead. The Biden administration blamed Iran for the attack. Since Tower 22 is a key node in the coordination of U.S. attacks on Iran-aligned militias, it was a logical target. Responding in part to pressure from its more hawkish critics in Congress, the administration retaliated by launching attacks on 85 sites in Iraq and Syria that are linked to Iran.

Iran’s “axis of resistance” links up a number of groups that have different ideologies, religious beliefs, and positions within their own societies. Israel’s invasion of Gaza has given this constellation of forces a new focus and a new cohesion.

Israel has defied international law and even common sense by continuing to prosecute its war against Hamas and killing nearly 30,000 Palestinians, two-thirds of them women and children.

Hezbollah, with 40,000 fighters, is perhaps the most significant, given that its political wing has dominated Lebanese politics. After October 7, Israel and Hezbollah have traded attacks across the border. Most recently, Hezbollah launched drone attacks in northern Israel and Israel responded by destroying weapons depots deep in Lebanese territory. The key to preventing a wider war in the region is negotiating some kind of agreement between the Israeli government and Hezbollah.

The United States has also retaliated against the Houthi attacks in the Red Sea, through which 12% of global trade passes. These retaliatory strikes don’t seem to have had much effect on the Houthis’ resolve. This weekend, they struck a ship operating under the flag of Belize and also knocked out a U.S. drone. The Houthis enjoy the advantage that real estate agents always talk about: location, location, location. They’ve already caused a dip in the global economy as ships have begun to reroute around South Africa, adding time and cost to shipments of oil and other commodities.

In Iraq, several pro-Iranian militias emerged from the wreckage caused by the U.S. invasion in 2003, including the Popular Mobilization Forces and Kata’ib Hezbollah. Although there is overlap, the former has effectively become part of the Iraqi army while the latter has joined with other groups to form an umbrella organization unaffiliated with the Iraqi government called Islamic Resistance in Iraq. They all want the remaining U.S. troops out of their country.

And they are all incensed by the war in Gaza.

Israel has defied international law and even common sense by continuing to prosecute its war against Hamas and killing nearly 30,000 Palestinians, two-thirds of them women and children. It’s not exactly news that Israel is ignoring considerations of human rights and basic morality in its destruction and disenfranchisement of the Palestinian community. What’s different this time is the failure of the Netanyahu government to put the lives of Israeli hostages first and pursue negotiations for their release.

Approximately 130 of the original 253 hostages that Hamas and related organizations seized in Israel on October 7 remain in Gaza. Hamas released 105 in an exchange and four others unilaterally. Israel rescued three and killed three others in a botched rescue attempt. In addition, at least 30 of the 130 remaining hostages are believed to be dead. These hostages are the only real bargaining chip that Hamas has.

Grand Bargain

With negotiations over a cease-fire stalemated in Egypt, the Netanyahu government is planning to launch a new offensive on Rafah, Gaza’s southernmost city. The United States, basically pleading with its obdurate ally not to attack Rafah, has gone so far as to support for the first time a U.N. initiative for a temporary pause in fighting (even as Washington continues to reject resolutions calling for an “immediate cease-fire”).

Hamas has proposed a 150-day cease-fire that turns into a permanent truce, a prisoner exchange that would release thousands of detained Palestinians, and an Israeli military withdrawal from Gaza. Israeli Prime Minister Benjamin Netanyahu has dismissed this proposal as “delusional.” He doesn’t want to promise a troop withdrawal. And he insists on a ratio of three Palestinian prisoners released for each hostage.

If the details can be worked out—and there’s no guarantee that Netanyahu in particular will budge—this kind of cease-fire could serve as the keystone of a grand bargain in the region.

When the elephants are no longer fighting, the grass has a chance to regrow.

Antony Blinken, Biden’s secretary of state, has been racing around the capitals of the Middle East to build support for an audacious plan. It looks roughly like this: Saudi Arabia extends diplomatic recognition to Israel and the world comes together to support a new Palestinian state. In effect, Blinken is trying to reignite the Abraham Accords that Jared Kushner started during the Trump administration, but linking Saudi recognition of Israel to a two-state solution rather than simply a cash payout to the Palestinians. According to Axios, “There are several options for U.S. action on this issue, including: Bilaterally recognizing the state of Palestine; not using its veto to block the U.N. Security Council from admitting Palestine as a full U.N. member state; encouraging other countries to recognize Palestine.”

You might think that the spoiler in this scenario would be Iran. After all, Tehran has activated its “axis of resistance” in support of Hamas. It has never been coy about its opposition to Israel. And it’s not exactly been cozy with the United States either.

But Iran is actually not the spoiler.

In recent days, the Iranian government has been trying to rein in its allies’ militias in Iraq. Though not all of these forces agree, there have been no attacks on U.S. positions in Iraq and Syria since February 4.

This restraint is not just about avoiding a direct conflict with the United States. Iran’s position on Israel has been evolving as well. Even though the Iranian leadership continues to lambaste Netanyahu and his colleagues, it has moved toward embracing a two-state solution. Explains Javad Heiran-Nia at Stimson:

The Iranian position has been that Israel is illegitimate and that a future state should be determined through a referendum of Palestine’s pre-1948 inhabitants and their descendants. However, Iran has been trying not to be isolated in the Islamic world and recognizes that other countries such as Saudi Arabia and Turkey are likely to play a bigger role in diplomacy and reconstruction following the Gaza war. In addition, there are divisions among Iranian Shi’ite clerics about Palestine, with some members of the Qom Seminary supporting a two-state solution. Former reformist president Mohammad Khatami, himself a senior cleric, has said that Iran would accept a Palestinian state alongside Israel if the elected Hamas government chose this path.

Another key part of this evolution was, courtesy of China’s diplomatic efforts, a rapprochement between Iran and Saudi Arabia last spring. The longstanding Saudi-Iranian feud, which is both confessional and geostrategic, came to a head recently in the war in Yemen, with Tehran and Riyadh supporting separate proxies in the conflict. That war has large subsided, though talks to bring a formal end to the conflict have stalled. Nevertheless, Iran and Saudi Arabia seem willing to negotiate modest agreements of mutual benefit.

When the elephants are no longer fighting, the grass has a chance to regrow.

Remaining Challenges

Netanyahu has promised to launch the assault on Rafah by the start of Ramadan if the remaining Israeli hostages are not released. Ramadan begins on March 10.

Three weeks is not a lot of time to pull together a grand bargain or even a minor agreement. Barring such an agreement, however, the opportunities for murderous stupidity multiply.

Getting Netanyahu to agree to anything is not easy. But he seems to believe that bringing home the remaining hostages can salvage his tattered reputation. The dismal track record of the Israeli military rescuing those hostages should push him in the direction of a cease-fire and a prisoner exchange. But Netanyahu still has the Entebbe model in his head, the daring rescue of hijacked airline passengers in Uganda in 1976 (the only casualty among the Israeli commandos was Netanyahu’s brother). Without the element of surprise on its side, Israel is not likely to repeat the Entebbe model in an assault on Rafah.

Never has the risk of a wider war been greater.

Preventing such an attack on Rafah will be challenging enough. The larger deal that could bring about a Palestinian state faces even longer odds.

Netanyahu has made it clear that his vision of Gaza’s future is as an occupied territory, administered by Israel. Meanwhile, Israeli settlers have eaten away at what might constitute the core of a Palestinian state in the West Bank. That doesn’t leave a whole lot left for an independent state, particularly a non-contiguous one. Meanwhile, Israel has generally insisted that any Palestinian entity can’t have a military. And, because Netanyahu’s government has vowed to eliminate Hamas, it would be difficult to imagine Israel tolerating a role for organization in such an entity.

Which means that a Palestinian state at this point would have to be something of a sleight of hand. The leadership would have to include some representation from Hamas—given its current popularity among Palestinians—but those representatives would probably have to “disconnect” from Hamas. The state would lack such requirements of a state as a military, but it could have bodies like a domestic security force that could one day become an army. There would have to be some “land for peace” arrangement that provides the new state with enough contiguous territory to ensure viability. And Jerusalem would become something of a Brussels shared by the two states.

Ironically it has become easier to get Iran and Saudi Arabia to agree than to expect Netanyahu and Hamas to come to some understanding. There’s no waving of a magic wand to replace the leadership of Israel and the Palestinians with more accommodating leaders. The best scenario is to achieve some reduction of tensions, some release of hostages, some stepping away from the brink of a wider war. With a reduction in tensions comes the possibility of new elections in Israel and the emergence of new leadership in Palestine.

The world waits. Never has the risk of a wider war been greater. Never has the need for imaginative diplomacy been so urgent.