"Israelis feel a lot like their prime minister — deeply frustrated. They want to get tough, but they know they have to go on with the pursuit of peace. At the moment the bomb went off, Barak's office was waiting for Arafat to make his promised televised announcement calling for calm. But the announcement never came.

"Politically, though, the cease-fire doesn't make Barak's life more difficult than it already is, since he's already out on a limb. Edging out further is unlikely to make him any more vulnerable. Right now he's safe in power because he's bought off [the ultra-Orthdox] Shas party for a month, and after that he faces the choice of either buying them off again, or else reviving negotiations with Likud to form a unity government. They agreement they're offering is not that hard for Barak to swallow, but of course once they're in they would have him over a barrel and could press for more concessions to their agenda."

Why did Barak choose Shimon Peres, whose domestic political standing is considerably diminished, to broker a new deal with Arafat?

"Barak chose Peres because Peres has a relationship with Arafat, and because he has played a little role in the peace process under Barak, his relationship with the Palestinian leader hasn't been as strained by recent events as Barak's has. Peres was able to give Arafat a big dose of empathy, which he seldom gets from Israeli leaders. Peres told us today that he had tried to put himself in Arafat's shoes and understand the problem from his side." What does Peres see as the steps that will follow if the cease-fire holds?

"Peres is not enormously hopeful about the prospects for reviving the peace process. You'd describe his mood as somber to say the least. He said the path ahead has great many mines, and there's clearly a major minesweeping operation required.

"The Israelis are waiting to see what Arafat will do, because he has to find a balance between the great public support for the intifada and the realization that Palestinians can't carry on with military action without receiving some kind of nasty surprise from the Israelis. When Arafat and Peres met, there was a sense that things were spiraling out of control — shootings of Israeli security guards in Jerusalem, the shooting of three Israeli soldiers in the West Bank and a stepped-up response by the Israeli military. So there was a realization on both sides that things aren't going to level off, but are threatening to escalate. Yesterday's bomb only confirms that fear."

So what are the Israelis expecting of Arafat?

"They don't expect him to stop every terrorist attack, but they do expect him not to loosen the leash on the terrorists, which he has essentially done by releasing them from prison and encouraging them. But they do believe that this time, Arafat is showing more will to try and rein things in. If he's prepared to stop the shooting, that would go an awful long way. Israelis don't like the rioting and Molotov cocktails, but they can live with it. If Arafat can live with that himself, the Israelis are prepared to soften their own tone, which they've begun to do."