The July 10 acquittal of former Israeli Prime Minister Ehud Olmert from most of the corruption charges against him is a watershed moment for the Jewish state and, perhaps, for the whole region.

On the most obvious level, the verdict that clears Mr. Olmert of charges in two major matters undermines the credibility of the general prosecution in Israel. This is especially true given the harsh words the court had to say about the reliability and coherence of the star witness against Olmert. Many in Israel are wondering about the ease with which the attorney general’s office indicted a prime minister and threw an entire nation into turmoil on the basis of such testimony.

The acquittal may also have a chilling effect on the attorney general’s willingness and motivation to pursue future cases of political corruption. Constitutionally, the judgment has already reignited calls for checking the authority of the attorney general’s office, either by splitting its authority between different agencies or by creating an independent bureau that would oversee its decisions.

One way or another, what four years ago looked like a triumph for the rule of law – the ability of Israeli officials to fearlessly investigate and eventually prosecute a sitting prime minister – now looks more like something that could only happen in a banana republic: a political leader removed from office, at an incredibly sensitive time, on the basis of surreally flimsy evidence.

But the most interesting implications of the court’s decision are, of course, political.

Olmert was responsible for the most far-reaching proposal an Israeli government ever made to resolve the Israeli-Palestinian conflict. His 2007 offer to Mahmoud Abbas included not only a retreat to the 1967 lines (with some territory swaps) and the allowance of a symbolic number of Palestinian returnees. Astonishingly, it also offered a commitment to the division of Jerusalem and to its joint administration by an international committee consisting of Israelis, Palestinians, Americans, Jordanians, Saudis, and others.

In her memoir, former US Secretary of State Condoleezza Rice reports being amazed by these ideas and comments that late Israeli Prime Minister Yitzhak Rabin had been assassinated for offering much less.

The court’s decision may well clear the way for Olmert’s return to Israeli politics. Such a return depends on a pending case against him in which he is charged with accepting bribes connected to a construction project while mayor of Jerusalem. And such a comeback also depends on whether the judges will determine that there is special severity in the minor offense of which he was convicted Tuesday – breach of trust. Sentencing is scheduled to take place in September.

Neither of these contingencies is likely to pose a problem.

The pending case against Olmert is said to depend on a witness even less reliable than the one at the center of Tuesday’s acquittal. And the court is unlikely to issue a special rebuke on the breach of trust charges. After all, Olmert was thoroughly cleared from the two major accusations that gave rise to the indictment against him in the first place.

Olmert has announced that he will not return to politics. But that should be taken with a very healthy dose of skepticism. According to the Israeli daily Haaretz, Olmert spoke with several associates shortly before the verdict in his case was handed down, and told them that he was the only viable centrist contender for prime minister. Israeli history certainly provides plenty of examples – from David Ben-Gurion to Yitzhak Rabin to Ehud Barak – of those who retired "permanently" from politics only to find themselves at the helm again a few years later. And Olmert is especially well positioned as a comeback kid.

The liberal leaning upper middle classes would support him because they identify with his bold political proposals to end the Israeli-Palestinian impasse. The right-leaning middle and working classes who would have normally been alienated by the cigar-chomping, jet-setting, Montblanc-collecting politician can now view him as a victim of the establishment – someone set up and almost taken out by the perceived elite “rule of law gang.”

Olmert’s path back to the leadership of his Kadima party seems paved. As does a political alliance with an important emerging centrist figure, Olmert’s friend, the former journalist and media personality Yair Lapid. Mr. Lapid recently established the Yesh Atid party, whose platform focuses on improvements in health care, affordable housing, public education, Israel’s governance system, and other concerns popular with the middle class.

If Olmert does return, the political discussion in Israel, dominated as it is by Prime Minister Benjamin Netanyahu’s fixation on Iran and a recent popular fascination with the question of enlisting the ultra-orthodox to military service, is going to change. 

Olmert will almost certainly refocus Israel on the Palestinian question. Whether or not he could defeat Mr. Netanyahu in a general election remains to be seen. But Olmert’s return to politics would mark an interesting shakeup of the Israeli political scene and would, at the very least, present Netanyahu with a formidable challenge and force him to broaden the set of issues he presents to the Israeli public.

Perhaps it is fitting to end with a far-flung hypothetical. In a cell in Hadarim Prison near Tel Aviv sits another leader who gained his gravitas from being put on trial by Israeli authorities: Palestinian leader Marwan Barghouti who, unlike Olmert, is actually guilty of the very serious charges leveled at him. He is a killer and a terrorist sentenced to five life sentences. But by some regards, he is no more a killer and no more a terrorist than other political leaders who have gone on to win the Nobel Peace Prize.

With a bit of optimism and a bit of squinting it is possible to imagine a future Prime Minister Olmert releasing and reaching a historic deal with Mr. Barghouti. The Israelis and Palestinians desperately need their de Klerk and Mandela – two leaders who have the courage and the authority to tell their constituents that it is time to end the conflict even if the concessions involved are heart wrenching. The acquittal of Olmert could have, inadvertently, moved them closer to getting those leaders.