Abbas might as well have ripped up the U.S.-backed Roadmap, the three-phase peace plan that was supposed to lead to the creation of a Palestinian state in two years. Although Abbas could return to form a new government at Arafat’s behest, Palestinian officials close to him say the chances are very slim. His resignation leaves the Bush administration groping to put its peace policy back on track, even as it contends with an Israeli government determined to intensify “all-out war” against militant groups. Just four hours after Abbas stepped down, an Israeli F-16 fired three 500-pound missiles at an office building in Gaza City, where Hamas spiritual leader Sheik Ahmed Yassin was meeting militia commanders. The raid lightly wounded the quadriplegic cleric in the hand and injured 15 others. A senior Israeli military official said the timing of the attack was coincidental and called the meeting of the Hamas leadership “a rare operational opportunity.”

Only a short while ago, the Bush administration was betting that war in Iraq would change the whole Mideast calculus for the better–that “the road to Jerusalem ran through Baghdad.” Even more recently, State Department officials spoke glowingly of Arafat’s decline and Abbas’s rise as a “triumph of American leadership.” Yet the Roadmap is increasingly looking like a blown opportunity. Critics, even some within the administration, say the United States never pressured Ariel Sharon’s government to make concessions–such as significant prisoner releases, removal of roadblocks, a settlement freeze–necessary to strengthen the Palestinian prime minister. And Abbas played into Sharon’s hands, refusing to crack down on militants for fear of sparking a civil war.

Now, as Palestinian frustrations intensify, American options for merely reviving the Roadmap are limited. Washington could dispatch a high-level envoy to the region and apply intense pressure on Arafat to restore Abbas to power. But the outgoing prime minister is already regarded by most Palestinians as an American puppet, and any attempt to shore him up would probably backfire.

Palestinian officials say the only way to gain Arafat’s cooperation on security is to force the Sharon government to embrace steps required by the Roadmap. But President Bush won’t likely come down hard on Sharon to make concessions at a time when Hamas and Islamic Jihad are threatening to send Israelis home in “coffins.” For their part, the Israelis feel free to continue targeted assassinations. The Americans “don’t tell us to keep killing Hamas leaders, but we don’t hear any criticism,” says one senior Israeli official. “They say: make sure they are good, clean air strikes, and we agree that we don’t want to kill innocent people.”

Israelis have floated a more dramatic possibility. Last week Sharon’s hawkish Defense minister, Shaul Mofaz, told Israel’s Army Radio that the government could expel Arafat by the end of this year. “I believe that he has to disappear from the stage of history,” Mofaz said. (American officials have denied reports that they might allow such a move.) Critics of the strategy say that exile would raise Arafat’s stature even higher, enrage ordinary Palestinians–and paralyze all chances for a peace agreement for years. “I’d like to see the Palestinian who’s willing to negotiate with Israel if they expel Arafat,” says Yossi Beilin, a former negotiator of the Oslo accords. “We’ll end up dealing with [Sheik] Yassin.”