As everyone knows by now, Hezbollah captured to Israeli soldiers, and in retaliation the Israelis have been on a bombing spree in Lebanon - hitting the main airport in Beiruit, and hitting bridges, a TV station, and various other infrastructure in southern Lebanon.

Leaving aside the ethical issues for the time being, let's examine how this plays out.

Facts on the ground:

1) Palestinians and Arab Israelis are outbreeding Israeli Jews.

2) Lebanon is not capable of disarming Hezbollah. Hezbollah is the actual government of southern Lebanon, whether it is recognized as such or not - it provides law, civil defense and most of the social welfare services.

3) Hamas has fractured under the pressure Israel put it under. The civilian leadership and the military leadership do not see eye to eye, and the civilian leadership cannot, at this time, control the military leadership, even if it wanted to. If it re-coalesces under this pressure it will likely do so because the civilian leadership moves over the military position, rather than vice versa (ie. I believe that as tens of thousands of Palestinians die due to infected drinking water, drought and very probably plague, the natural reaction will not to be to give in to Israel.)

4) While in the US and parts of the West this is viewed as having been started by the capture of an Israeli soldier, in the Muslim world this is viewed as starting when the Israelis shelled a beach party.

5) Hezbollah is capable of standing up to the Israeli army indefinitely. They did it before, they can do it again, so long as Syria and Iran (and, possibly, certain Saudi interests) are willing to supply them with arms and aid.

6) Iran and Syria, with the eager cooperation of Israeli hawks, have just opened up another theater against the US. Israel is seen as a US proxy (it's more the other way around, but whatever) and this ties Israel down in a war they cannot win.

7) What Israel is doing, especially in Gaza, is seen by most Muslims as a war crime. The result will be even further hatred, not of Israel, but of the US. As a practical matter, donations in mosques for the Palestinian cause, will increase substantially. While much of that money will go to humanitarian aid, other parts of it will go to military aid for Hamas, Islamic Jihad and Hezbollah. If the Palestinians ever get their hands on significant numbers of shoulder SAMs, the Israelis will be in a world of hurt.

8) The US is in full military and fiscal overstretch and bleeding red ink and relative industrial capacity. It is tied down in far east by North Korea, and in the Middle East in Iraq and by Iran.

Israel cannot win this war militarily. What they are betting is that if they inflict enough terror on the Palestinians and Lebanese Hezbollah, that they will cave.

Sadly for them, they can't win a war of occupation in Lebanon. A bombing campgaing, absent ground troops, while painful for Hezbollah, will only make their supporters hate Israel more. It will not weaken Hezbollah.

In terms of Palestine they've been unable to get a two state solution both because they have bargained in bad faith (increasing settlers through the nineties, for example) and because they have systematically assassinated and imprisoned all those Palestinians who, being their enemies, and having great prestige, could actually have not only negotiated a peace, but delivered it. Killing the founder of Hamas, who had mused that he could see his way to a 99 year truce with Israel, was a particularly stupid move.

The period from the Iraq invasion until now was a period in which there was a real chance at making a good deal with the Palestinians. The money that used to flood into Palestine to fund resistance there had largely left, and flooded into Iraq. The Palestinians were weak, and feeling abandoned. And so Sharon, in carefully measured moves, tried to create a two state solution. He encouraged Hamas to run for election, and I suspect he knew they would win. And unlike Olmert I suspect he might have negotiated with them - mostly on his terms, but negotiation indeed.

What Olmert has done is effectively start undoing everything Sharon did. Sharon had a significant political advantage - he didn't have to prove to anyone he was tough. Everybody knew he was tough. Olmert, on the other hand, seems to feel a need to prove his personal toughness and in so doing he has moved Israeli troops back into Gaza and is even threatening to move them back into Lebanon.

In fact a move back into Lebanon is almost inevitable now. Hezbollah will use parts of Lebanon to perform rocket and mortar attacks on Israel, and eventually the Israeli army will have to take the land the attacks come from in order to prevent further attacks.

That puts them in Lebanon, and puts more Israeli soldiers in play.

And since Olmert has now shown that Israel's weakness is captured soldiers, Hezbollah will go out of its way to capture as many Israeli soldiers as possible.

None of this leads to a two state solution. None of it does anything but embroil Israel in a guerilla war and occupation of not only Palestine by with a good chunk of southern Lebanon, and by proxy, in a conflict with Syria and Iran.

And in such a war, and in a situation where the Israeli Jews are being outbred in their own country, failure to either create a lasting victory (ie. one where Palestine and Hizbollah and other interested parties can't attack Israel) or a lasting peace (one where they don't want to attack Israel), Israel's enemies will, inevitably win.

All they have to do is keep the pressure on and outlast Israel.

And what they are showing, today, is that they are willing to accept the costs of keeping the pressure on.

In such a situation Israel really has only two choices:

First: find (or help create) someone who can deliver a lasting peace.

Second - win the war. Which can only be done by ethnic cleansing.

In the meantime, the area around Israel will remain one of the world's main conflict zones - until Israel is destroyed, commits atrocities on a mass scale, or manages to negotiate a real peace.

Sadly, at this point, I don't think the smart money is on peace.