Three weeks after Barack Obama is sworn in as president, Israelis will hold elections in which hawkish former Prime Minister Benjamin Netanyahu is the front-runner. That could complicate U.S.-backed efforts to end a 41-year Israeli occupation and create an independent Palestinian state.
Palestinians disagree over when President Mahmoud Abbas' term expires, with the Hamas militants who now rule the Gaza Strip insisting he must step down in January. He looks likely to stay in office, but the fact that his forces control only the West Bank after Hamas' bloody takeover of Gaza last year is another major obstacle to peace.
If the negotiations between Israel and Abbas - launched over a year ago at Annapolis, Md. - are to have any chance at all, they are sure to require intense U.S. intervention.
Many of Obama's top staff picks are well versed in the conflict: Chief of Staff Rahm Emanuel has Israeli background; Secretary of State Hillary Clinton's husband made a major push to forge a peace deal as president; and National Security Adviser James Jones for the past year has served as Mideast envoy in charge of improving the security conditions necessary for a peace deal.
Palestinians are hoping the Obama team will temper President Bush's blanket support for the Jewish state and take a tougher line by pressuring Israel to stop expanding settlements on land the Palestinians claim for a future state.
Obama's options include opening a dialogue with Syria and Iran, countries that have long stoked the flames of the Israeli-Palestinian conflict, and trying to narrow the split between Abbas' Fatah movement and Hamas.
The parties began acknowledging months ago that they could not meet the one-year deadline set at Annapolis. Even if they succeed, it almost surely cannot be implemented until Gaza - which along with the West Bank is supposed to comprise the future state of Palestine - is reclaimed from Hamas, which opposes Israel's right to exist.