While it is possible that the Obama administration's adoption of a harder line on Israeli West Bank settlements could help mend U.S. credibility in the eyes of Palestinians and the wider Muslim world, none of this will occur without the current Israeli leadership putting up a fight.

As President Barack Obama takes the reigns of power in Washington, the world that awaits him and his administration poses significant challenges.

As an increasing number of Israelis and Palestinians shift towards more militant means of achieving their respective political goals against a backdrop of coalescing hawkish groups, failed peace initiatives, and rising anti-Israeli sentiment, expect a continued growth in Mid-East violence centered on Israel.

After years of gradually losing its standing as a neutral arbiter between the Israelis and Palestinians, the U.S. government finally and openly declared sides during the Gaza conflict.  Unless President Barack Obama delivers on his promise to chart a new course, the U.S. will lose its place as a primary Middle-East mediator.

Despite Israel and Hamas’ separate announcements of a ceasefire in Gaza, prospects for a regional peace ensuring Israeli stability and security are likely to collapse, resulting in the escalation of Islamic extremism and Israel’s increasing isolation.

Israel is about to launch Phase III of Operation Cast Lead – the capture of Gaza City.  Electoral considerations almost certainly predict that Israel will attempt to topple Hamas and re-occupy Gaza, until Hamas’ rival Fatah can re-establish control on the ground.  The Third Palestinian Intifada may be in the offing.

As allegations of war crimes mount and anti-Israeli protests sweep across the globe, Israel appears to be losing its PR offensive against Hamas.  Meanwhile, a new generation of Palestinians scarred by the war will increasingly turn to militancy, resulting in perpetual conflict in the region.

Israel has launched a ground invasion of Gaza, re-entering the tiny territory after three years.  Almost 600 Palestinians have died and over 2700 have been injured, while a reported 10 Israelis have died, including 1 soldier, and a few dozen have been injured in the 11-day war.  The United States has blocked a ceasefire attempt at the UN.

The 2008-2009 Israel-Gaza War enters its second week, with no signs of letting up any time soon.

Israeli and Palestinian power players on both sides of the border calculated that a war would increase their chances of electoral victory, scheduled for early 2009.