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Peace talks with the Palestinians are stalled over two major issues. First, there is still no single Palestinian government to negotiate with. Fatah and Hamas still cannot agree on how to create a joint Palestinian government, or a single negotiating team. Second, Palestinians still insist that any peace deal include the "right of return" (the 4.7 million descendents of the 700,000 Arabs who fled Israel in 1947 be allowed to return to Israel and become citizens). If allowed, this would destroy Israel, as a majority of the voters would be Arabs. Most of these potential returnees have not been allowed to settle down in the Arab countries they fled to, but instead must live in refugee camps.
The West Bank is thriving, while Gaza just scrapes along. The smuggling tunnels from Egypt to Gaza still operate, sustained by cash to bribe Egyptian police. Iran is the main source of cash, and the Egyptians are willing to tolerate that as long as Hamas does not provide a sanctuary for Sunni Arab terrorists (who are at war with Egypt.) Egypt still believes several terrorist cells in Gaza are plotting attacks in Egypt. Meanwhile, Fatah continues to jail Hamas activists in the West Bank, while Hamas goes after Fatah loyalists in Gaza. There have been fewer rocket attacks from Gaza to Israel, apparently in an effort to get pro-Palestinian European governments to put more pressure on Israel to lift the blockade. That would make it easier for Hamas to import long range rockets, and lots of them. Eventually, Hamas wants to make a large scale attack on Israel.
Israel refuses to halt Israeli settlers from moving to the West Bank, since key (for forming a government) Israeli political parties, and a large minority of the Israeli populations, backs this practice. Meanwhile, most Arabs want Israel destroyed, and consider any peace deal just a step in that direction. Opinion polls among Palestinians show that approval of Hamas has declined from 27.7 percent six months ago, to 18.8 percent now. Meanwhile, approval of Fatah has gone from 26 percent to 34.9 percent. As for who was responsible for the failure of peace talks between Fatah and Hamas, 26.5 percent of Palestinians blamed Israel, 23.5 percent blamed Hamas and 15.5 percent blamed Fatah
Egypt, which has been hosting reconciliation talks between Fatah and Hamas, has given the two groups until July 7 to make peace, or Egypt will stop hosting the talks. It does not look like any agreement will happen.
Bit by bit, Israel is turning over security duties, in the West Bank, to Fatah police. If the Fatah security personnel allow terrorists to get past them, the Israelis will, as they have done before, replace the Fatah police with Israeli troops (as has happened several times in the past).
July 5, 2009: Fatah police have arrested ten Hamas members in the West Bank. Police also seized several homes belonging to the men, and accused the group of plotting to murder Fatah officials. The police also said it had intercepted $8.5 million in cash, over the last three months, that was intended for the plotters.
June 30, 2009: The Israeli Navy intercepted a boat carrying three tons of medical supplies for Gaza, and 21 foreign pro-Palestinian activists, and took the boat to an Israeli port. The crew and activists were arrested.
June 20, 2009: An Israeli submarine went through the Suez canal and conducted naval exercises in the Red Sea. Israel said that the sub would not be stationed in the Red Sea, but would return to its Mediterranean base.