🇮🇱 Israel: Downgraded to WEAK

Good morning

The increasing pressure on Israel has made me question the ongoing rating of STABLE for several months now, but events over the last week — both internal and external — have led me to the conclusion that the country’s stability rating should be downgraded to WEAK.

(The Decis Intelligence summary is here)

Specific events of concern were.

Internal

The attack on the Sde Teiman detainee facility by a right-wing mob enraged at the detention of soldiers accused of prisoner abuse and torture.

• This speaks volumes to the enormous internal divisions within Israel that preceded October 7th but are now significantly exacerbated. The fact that the mob attacking the IDF was led by a Knesset member and supported by other far-right politicians, including cabinet members, shows just how broad this division is.

External

The assassination of Hamas political leader Ismail Haniyeh in Iran on Wednesday.

• First, this ends any idea that there will be a negotiated settlement in Gaza as Haniyeh was seen as the only one who could potentially bring Yahya Sinwar and the military arm of Hamas into a deal.

• Second. conducting the attack in Tehran provokes Iran and will force their new President, Masoud Pezeshkian, whose swearing-in Haniyeh was attending, to respond forcibly.

Moreover, rather than these events bringing things to a head, there is much more potential for destabilization.

(Note, we are not glossing over the assassination of Hezbollah commander Fuad Shukr early on Wednesday in Beirut. As a retaliation for Saturday’s strike on the Golan Heights by Hezbollah, this was as targeted and proportional a response as could be expected from Israel. So, by itself, this is not seen as a potential source of escalation although Hezbollah may become involved in whatever response Iran plans to the Haniyeh attack.)

More Instability Likely

There are too many unknowns to provide a detailed assessment of what will happen next, but the broad conclusion is that the Israeli War Cabinet is now not interested in any kind of negotiated settlement. Moreover, there is a willingness to take action that could significantly escalate the situation and little concern about provoking Iran into direct confrontation.

This causes several additional problems for Israel.

First, this stance makes ‘winning’ against Hamas much more difficult as 1) they are backed into a corner and 2) it requires Israel to wipe out the organization completely: an almost impossible task with an ideological movement.

Second, the hostages have been, to all intents and purposes, abandoned. This will create a long-term rift between the families of the abductees and those committed to recovering them. If it transpires that Haniyeh’s assassination was to distract from the abuses at Sde Teiman as some are suggesting, this will create an even greater divide in society.

Third, the IDF is too depleted and overstretched to manage a conflict on multiple fronts. Gaza and Lebanon would be direct confrontations as would the West Bank which is close to boiling over due to settler violence. Iran, Syria and the Houthis are indirect confrontations but still add enormous pressure on an overstretched Israel military.

There is no plausible scenario where Israel wins each of these conflicts alone.

But, it is naive to think that the US will ride to the rescue. The Democratic Party is already under significant pressure to reduce and condition support for Israel due to the horrific situation in Gaza. Meanwhile, the GOP is becoming more isolationist and although many Republicans might talk tough about confronting Iran, others understand the challenge this would entail and have the experience of Iraq and Afghanistan in their minds.

So while America will not abandon Israel and allow the country to be overrun, that does not mean that there is a willingness in Washington for the US to become embroiled in a huge regional conflict.

All of these factors point to a weak, and increasingly unstable, Israel.

Wider Implications

Again, what this means specifically is too opaque to assess but some effects are already being felt.

Crude oil, which had been on a downward path for the last week, jumped sharply on Wednesday morning.

Israel’s economy is also being hit with an already volatile Shekel fluctuating significantly, and Israeli bonds are losing value. From Bloomberg:

All of this paints a gloomy and uncertain picture with many ‘what ifs?’ and few concrete answers. But this is also one of most uncertain periods in recent history for Israel and the Middle East with no clear outcome and no easy solution.

A note earlier in the year was sub-titled, Sometimes, things get worse... before they get worse. Sadly, that still holds true, so plan accordingly.