US President Barack Obama’s commitment to Middle East peace has made little progress in the last eight months. As his Middle East envoy George Mitchell visits leaders in the region this week, Palestinian optimism has turned to resentment. Time is quickly running out. Unless there is immediate progress toward establishing a sovereign Palestinian state, there will be a deadly third intifada that could quickly escalate into a major regional conflict. To prevent this volatile situation from becoming a catastrophe, US policy makers need to make immediate steps toward a two-state solution.

This will be a great challenge in the current environment, marked by years of violence and failed negotiations, a new right-wing Israeli government that doesn’t consider the West Bank and East Jerusalem occupied land, divided Palestinian leadership, and a deteriorating Palestinian economy. There is also an increasing threat from new extremist groups in the Gaza Strip, where Hamas has proven incapable of running a government. If Fatah, the largest faction of the Palestinian Liberation Organization, doesn’t produce results soon, it will lose its limited control over the West Bank.

Israel could empower Fatah by closing checkpoints, but it fears its withdrawal from the West Bank will be followed by rocket attacks similar to the 2005 Gaza evacuation, but this time they could hit Israel’s major population centers and main airport, stifling its economy. Meanwhile, Israeli settlers continue to expand in the West Bank, destroying any hopes for a viable Palestinian state. Iran has also challenged the US “road map” to peace with its support of Hamas and Hezbollah, determination to become a nuclear power, and vitriolic warmongering statements from President Ahmadinejad.

With regional stability and Washington’s role as a regional power broker on the line, the stakes have never been higher. The Arab world, still loathing George W. Bush’s debacle in Iraq, might reconsider America’s “democratic” ambitions for the region if it were to support a Palestinian national unity government between Fatah and the democratically elected Hamas party. Until then, any concessions from Fatah toward Israel will be seen as weakness and could threaten their power base in the West Bank; especially if Palestinian concessions are not immediately reciprocated by Israel. A US strategy that leverages the assistance of Saudi Arabia and Egypt will help pressure Hamas into keeping the cease-fire, supporting peace talks and surrendering rockets. Support from Arab countries will also facilitate the Obama administration’s efforts to engage Syria, which would weaken Hamas and Hezbollah, while also engaging Iran.

American policymakers should avoid over optimistic time frames and expectations that will be targeted by extremists on both sides. Instead, US policymakers should set up a new security paradigm based on UN Resolutions 242 and 338 to provide transparency and measure progress in a way that delineates a clear path for partners to reciprocate concessions. For example, as Israel freezes settlement expansion and withdraws from its settlements in the West Bank and East Jerusalem, Palestinian parties can facilitate these concessions by negotiating inch for inch land swaps from Israel proper. In the absence of change, Israel’s occupation of Palestinian lands will continue to be a rallying cry for extremism and anti-Western sentiment in the region. US policies toward Israel should continue to reflect the importance of a strategic relationship built on shared democratic values. However, the US should hinge its support on Israel’s efforts to live up to those values and demand immediate concessions to support Palestinian aspirations for a sovereign state. For their part, Palestinian leadership must show that it can take on the challenges that sovereignty demands by reciprocating those concessions with increased internal security. With an American president who is popular in the Arab world and with the support of key Arab allies, there is a unique opportunity to facilitate a peace settlement; but it is now or never and if this window of opportunity closes, violence will quickly follow.