Psychologically, in the long term, this could have a very profound impact in the sense that Israelis are grieving for an Arab monarch or identifying with an Arab nation, something that's never happened before. I think, however, in the short term, if we judge it in political terms, it's not going to have much of an effect.

The situation is grave from an Israeli point of view, probably on the verge of an explosion. There's a consensus both in the security establishment and in public opinion, and among most ministers in the government, that Israel needs to escalate its response to Palestinian terror.

The issue of releasing Palestinian prisoners is very unpopular in Israel, and if he goes too far, he'll suffer more than by his failure to reach an agreement.

Mr. Netanyahu and Mr. Arafat are at cross-purposes here. Mr. Netanyahu wants to tell his people that he has achieved a better agreement, with much better safeguards for Israelis. But the more he brags about his own achievement, the less desirable this agreement becomes for Mr. Arafat. Unless the two sides can indeed make the political decision to reach an agreement despite their own internal political achievements, we won't have an agreement.

The peace process doesn't seem to be in such good shape anyway. It's teetering on the brink of collapse, even before today's decision. This will bring it one step closer to final collapse.

As one of his aides once said, he has antifreeze in his blood... He is a very cool character, and when you judge him by his public performances you would think that everything is hunky-dory and going great. But an analytical assessment of the situation shows he is in trouble, despite the brave face that he's putting on.