Analysts and policy makers say the recent conflict between Israel and Palestinian militants in Gaza has sharpened the confrontation between Israel and Palestinians and is likely to present new challenges in the coming year.
Residents of Gaza have yet to recover from the exchange of aerial bombardments with Israel in late November and face rebuilding in the coming year. Six Israelis and more than 170 Palestinians were killed in the eight-day conflict.
Some buildings in Israel were damaged. But in Gaza more than 200 buildings were destroyed and several thousand damaged. It will cost an estimated $300 million to rebuild.
Israel reduced the threat of rockets fired from Gaza by Palestinian militants. But Gaza-based analyst Mkhaimar Abusada says the conflict boosted Islamist Hamas and weakened Palestinian Authority President Mahmoud Abbas, known as Abu Mazen.
"It's Hamas who is calling the shots. It's Hamas who decides if there is a cease-fire or there isn't going to be a cease-fire. It's not Abu Mazen or the PLO or the secular camp in the Palestinian society," Abusada stated.
The Gaza conflict eased the international isolation of Hamas as more than half-a-dozen foreign ministers from the region visited for the first time since the Hamas takeover five years ago.
A week after the cease-fire, the U.N. General Assembly overwhelmingly passed a resolution elevating the Palestinians to a non-member observer state.
"Now we have a Palestinian state," Abbas said.
Abbas returned home in triumph but analysts say the boost was symbolic, and temporary.
Israeli analyst Shlomo Brom notes that most of Israel's allies either voted for the Palestinian resolution or abstained. "The important ramification is the strategic ramification, the fact that Israel is becoming isolated more and more from even those that traditionally are considered its allies."
Israelis also are worried about efforts in the West to impose boycotts and sanctions, and by the rising power of Islamists from popular uprisings in neighboring states.
Palestinian analyst Rami Nasrallah says the real problem is Israel refuses to stop building settlements in the West Bank even though it can never hope to dominate the Palestinians there. "That's the challenge when it comes to the Israeli public. They know how to face a security threat but they don't know how to face peace," noted Nasrallah.
The Israeli-Palestinian peace talks have been stalled for years. And there is little expectation on either side that they will resume in the coming year.