Will it make it easier or harder to resolve the pressing problems of Palestine and Iraq – and the much bigger battle against Islamic extremism?
The more immediate question is: Who will emerge with what?
Ehud Olmert, the Israeli prime minister, says he wants three things: to secure the release of Israeli soldiers, to clear Hezbollah fighters from south Lebanon and to see Hezbollah disarmed and dismantled.
He wants some form of guarantee that Israel will be free from rocket attacks, whether from Gaza or from south Lebanon.
Some believe he would also like to see the collapse of the Hamas-led Palestinian government.
Few experts think Mr Olmert will secure all these goals, even if the fighting continues for some days.
Israel may be able to weaken Hamas and Hezbollah in military terms, but it is unlikely to force them out of business.
[For Israel] there needs to be in place a Lebanese government and a Palestinian Authority strong enough to prevent rocket or other cross-border attacks. Air strikes coupled with limited military incursions in both territories have made this less, rather than more, likely
Both enjoy a significant level of grass-roots support.
Israel’s actions may indeed be counter-productive, by boosting support for these groups beyond the immediate circle of their core Islamist constituencies.
Israel’s underlying dilemma remains unchanged.
If it does not wish to re-occupy either Gaza or southern Lebanon, then there needs to be in place a Lebanese government and a Palestinian Authority strong enough to prevent rocket or other cross-border attacks.
Air strikes coupled with limited military incursions in both territories have made this less, rather than more, likely.
Mr Olmert needs to emerge from this conflict with something he can call victory.
If he does not, that will weaken his own political position and jeopardise his ambitious plan to withdraw from large parts of the West Bank by 2010.
It is unlikely this crisis will leave the underlying problems of the Palestinian territories and Lebanon any nearer a solution.
As Arab rulers are only too well aware, the current conflict has inflamed anti-Israeli and anti-American feeling to a new pitch. In this sense its impact extends well beyond the Middle East
At the same time it is making the West’s closest allies in the Arab world distinctly nervous.
Saudi Arabia, Egypt and Jordan have taken the unusual step of pinning the blame for the conflict on Hezbollah and Hamas and their regional backers, Syria and Iran.
This reflects a genuine fear of where the crisis is heading, together with annoyance at what they see as an Iranian attempt to hijack the Palestinian cause.
As Arab rulers are only too well aware, the current conflict has inflamed anti-Israeli and anti-American feeling to a new pitch.
In this sense its impact extends well beyond the Middle East.
Hearts and minds
The issue of Israel and the Palestinians still has the power to mobilise Muslims as far away as Indonesia – or for that matter Muslims living in the West.
Moreover the conflict comes against a backdrop of other events which have aggravated tensions between Islam and the West.
Last year’s London bombings, the riots by young Muslims in the suburbs of Paris and the more recent controversy over cartoons depicting the Prophet Mohammed – all these events have had a negative and polarising effect.
They have made it harder for the West and its allies in the Muslim world to turn the tide in the global struggle against Islamic extremism.
They have made it harder for them to win the hearts and minds of the Muslim mainstream.
Many believe that the longer the current conflict in the Middle East continues, the more it will play into the hands of the radicals.