Isolation: Not since the 1970s has Israel felt so alone.

Its attack on an aid ship headed for Gaza last year cost Israel its alliance with Turkey,

which included joint military maneuvers and intelligence sharing. Jordan, the second country to make peace with Israel after Egypt, has

meanwhile snubbed Prime Minister Benjamin Netanyahu for not being more accommodating on the Palestinian issue. Even the relationship

between the U.S. and Israel has become increasingly chilled..

The potential for losing Mubarak, who kept relations with Israel steady, feels to some Israelis like the 1979 overthrow of the Iranian Shah, whose

regime had close ties with the Jewish state. “It was a big trauma,” says Uri Lubrani, who served as Israel’s representative in Iran in the 1970s. “It

forced us to find alternatives to some of Israel’s basic needs.”

Leakage: Egypt shares a border not only with Israel but with the Gaza Strip, ruled by the Islamic group Hamas, a Palestinian offshoot of the

Muslim Brotherhood. Already, guns and rocket launchers flow from Egypt to Hamas under the border through a network of tunnels dug by

Palestinians. Mubarak’s regime has occasionally tried to disrupt the supply, but not very effectively.

Israelis worry that a government headed by the Muslim Brotherhood would allow the flow of more sophisticated weapons. “This would make

Hamas much stronger and more difficult to deal with,” says Eiland, the former national security adviser. Eventually, an emboldened Hamas

might try to overthrow the Palestinian Authority in the West Bank, headed by the PLO’s Mahmoud Abbas, he says. And, with an Islamic group

stalking its western border, Jordan would also be vulnerable. “I’m not saying this is the most probable scenario,” Eiland says. “But it’s one we

have to take into account.”

Spending: The global financial crisis has largely bypassed Israel, whose economy grew by four percent last year. With violence down to almost

zero in the West Bank, Israel is more prosperous than it’s been in decades. But the uncertainty in Egypt is already being felt. The Tel Aviv Stock

Exchange dropped by several percentage points in recent days and the shekel has grown weaker against the dollar.

Even if Egypt stabilizes, analysts believe the Israeli military will have to retrain and reequip itself for a range of new scenarios -- and that means

more defense spending. In the decades since the peace agreement with Egypt was signed, Israel cut its defense budget from more than 20

percent of GDP to less than 10 percent, according to Shmuel Even, an expert on military spending at the Institute for National Security Studies at

Tel Aviv University. Though no one expects spending to revert to the 1970s level, the trend is now likely to track upward.

Deadlock: Though talks with the Palestinians are already in a deep freeze, a rollback of the Israeli-Egypt peace accord would make an

agreement on the Palestinian front even more remote. Successive Israeli leaders, including Netanyahu, have accepted the idea that land must be

ceded to the Palestinians in exchange for peace. The events in Egypt have emboldened the hardliners, who have long maintained that peace

agreements with the Arabs are generally worthless. “How good it is, in retrospect, that [former Israeli Prime Minister Ehud] Olmert did not give

up control of Judea and Samaria [the West Bank] and did not partition Jerusalem,” wrote one those skeptics, political scientist Hillel Frisch, in

the newspaper Yedioth Ahronoth on Monday. “At least the Iranians, Egypt…,Hezbullah and Hamas will not be able to fight against us at close

range.”