The classic Israeli response to times like these is to live life as normally as possible as an act of defiance. In 1996, when buses seemed to be exploding every other day, friends of mine were sure to take the same bus the very next day–a small victory in the psychological war of terrorism. In some ways, Israelis are keeping that tradition. Kids still play in parks unsupervised, the cafes are full and there is a real semblance of normalcy. The truth is, were it not for all the news, you’d have no idea where you were.

And yet the fear is real. For the past seven years, no matter what small crisis occurred, there was always hope by looking forward to the “final status” talks. Now that those talks seem to have ended in failure, there is a big question of “What now?” The unknown is always the most frightening, and people on the outside are throwing around the terribly misused word “war” to describe what’s happening here. Ironically, war can be less frightening for Israelis because they’ve fought wars before–they know the procedure and understand that there’s a beginning and an end. Israelis have taken to calling what’s going on now ha-matzav–“the situation”–a terrifying word because no one knows what it is, where it will lead to or where it will end.

So how did we go from handshakes one month to helicopter gunships and lynchings the next? There’s been a lot of finger-ointing on both sides, but here’s how ha-matzav looks from this perspective.

Israel has been a society deeply divided over the peace process every since the historic 1993 handshake between Israeli President Yitzhak Rabin and Palestinian leader Yasir Arafat, half the country has been opposed to territorial compromise, either because of an unwillingness to give up land, a distrust of Arafat or a combination. The other half has been willing to give up most of the West Bank and Gaza, and was even beginning to get used to the idea of a compromise on Jerusalem, if it meant an end to the conflict.

But as the talks became serious, opponents made efforts to derail the negotiations by calling for new elections. And of course Likud Party leader Ariel Sharon’s provocative Sept. 28 visit to the Temple Mount–a.k.a. Haram al Sharif, a site holy to both Muslims and Jews–the disposition of which is one of the most sensitive issues in the negotiations, was another gesture to stall the peace talks.

On the Palestinian side you have primarily two dimensions: “the street” and Arafat. The riots themselves seem primarily to be fed by immense disappointment and frustration with the peace process. Since its beginning, the Palestinian economy has declined, while the humiliation of the occupation continues. And so, one often hears that Palestinians are greatly disappointed in Arafat.

Although there’s disagreement about whether the riots were actually planned by Arafat, most Israelis agree he’s using them for his own political gain–both to increase his stature among his own people and to attract international support for the Palestinian cause. The problem is that in doing so, Arafat has lost all of his credibility among Israelis as a trustworthy peace partner. The main motivation for Israelis to make territorial compromises to the Palestinians was in order to end the violence. The fact that the Palestinian police have taken the guns that the Israelis gave them and turned against the Israelis seems to confirm the public’s worst fears.

So an agreement that seemed so close just a few months ago continues to be elusive. In my mind, the heart of the problem remains: you still have two groups with legitimate claims on the very same, very small piece of land. Neither group is going anywhere, and sooner or later each side is going to have to figure out some way to live their lives here. There truly is no other alternative.