Israel is now entering its third strategic environment. The constant threat of state-on-state war defined the first, which lasted from the founding of the Jewish state until its peace treaty with Egypt. A secure periphery defined the second, which lasted until recently and focused on the Palestinian issue, Lebanon and the rise of radical Sunni Islamists. The rise of Iran as a regional power and the need to build international coalitions to contain it define the third.
Israel's fundamental strategic problem is that its national security interests outstrip its national resources, whether industrial, geographic, demographic or economic. During the first phase, it was highly dependent on outside powers -- first the Soviet Union, then France and finally the United States -- in whose interest it was to provide material support to Israel. In the second phase, the threat lessened, leaving Israel relatively free to define its major issues, such as containing the Palestinians and attempting to pacify Lebanon. Its dependence on outside powers decreased, meaning it could disregard those powers from time to time. In the third phase, Israel's dependence on outside powers, particularly the United States, began increasing. With this increase, Israel's freedom for maneuver began declining.
Containing the Palestinians by Managing its Neighbors
The Palestinian issue, of course, has existed since Israel's founding. By itself, this issue does not pose an existential threat to Israel, since the Palestinians cannot threaten the Israeli state's survival. The Palestinians have had the ability to impose a significant cost on the occupation of the West Bank and the containing of the Gaza Strip, however. They have forced the Israelis to control significant hostile populations with costly, ongoing operations and to pay political costs to countries Israel needs to manage its periphery and global interests. The split between Hamas and Fatah reduced the overall threat but raised the political costs. This became apparent during the winter of 2008-2009 during Operation Cast Lead in Gaza when Hamas, for its own reasons, chose to foment conflict with Israel. Israel's response to Hamas' actions cost the Jewish state support in Europe, Turkey and other places.