The Israelis under Shimon Peres began a final phased withdrawal from Lebanon in June 1985, except for a security zone where an Israeli-sponsored Lebanese force wages intermittent warfare against the Hezbollah, who enjoy Iranian and Syrian patronage.

An economic recovery plan also is put into place, assisted by the United States.

Hezbollah has engaged in increasingly sophisticated attacks against Israel and fought in Lebanon's civil war throughout the 1980s, including repeatedly coming to blows with fellow Shi'ite group Amal.

During this time, Hezbollah has allegedly engaged in terrorist attacks including kidnappings and car bombings, directed predominantly against Westerners, but has also established a comprehensive social services network for its supporters.

Hezbollah is one of the few militia groups not disarmed by the Syrians at the end of the civil war, and they continue to fight a sustained guerrilla campaign against Israel in southern Lebanon.

Israeli helicopter gunships attack the convoy of the head of Hezbollah, Sheikh Abas Musawi, in South Lebanon, in February 1992.

Musawi and his wife and children are killed.

Hezbollah has emerged as a leading political party in post-civil war Lebanon.

During the summer of 1993, attacks by Hezbollah guerrillas on Israel and its client South Lebanon Army lead to a sudden escalation of violence.

On July 25, Israel launches its largest artillery, naval, and air strike since 1982.

The attack lasts six days and leaves more than one hundred and thirty dead, five hundred wounded, and three hundred thousand homeless from seventy-five villages.

A cease-fire on July 31 is followed by Lebanese action to revoke all gun permits in the south and by the deployment of an army battalion to help maintain peace; ...

...Arab League ministers meeting in Damascus at the end of July pledge $500 million to help repair the damage.

Unexpectedly, Israel's negotiations with Syria had come to life first, but after an encouraging start, they have deadlocked by the summer of 1993.

Syria refuses to specify what it means by "full peace," a key Israeli requirement.

Israel refuses to withdraw to the armistice lines as they were before the 1967 war, which would effectively place the border with Syria on Lake Tiberias (the Sea of Galilee), Israel's largest source of fresh water.

The Middle East (1996–2007): From Stalled Peace to New Conflicts

Between 1996 and 2007, the Middle East experiences persistent turbulence, characterized by stalled peace initiatives, intensified internal conflicts, geopolitical realignments, and the profound repercussions of global events such as the September 11, 2001, terrorist attacks and the subsequent U.S.-led invasion of Iraq. This era reshapes the region profoundly, setting the stage for renewed tensions, sectarian divisions, and shifting power balances.

Stalled Peace and Intensified Conflict: Israel, Palestine, and Lebanon

The optimism sparked by the Oslo Accords of the early 1990s steadily diminishes amid violence and political stalemate. Israeli Prime Minister Yitzhak Rabin’s assassination in 1995, followed by a series of Israeli and Palestinian leadership changes, contributes to a breakdown in trust. The second Palestinian intifada erupts in September 2000 after Ariel Sharon visits the Temple Mount/Haram al-Sharif, triggering widespread unrest. Subsequent years see escalating violence, suicide bombings, and harsh Israeli military reprisals.

In 2005, under Prime Minister Ariel Sharon, Israel unilaterally withdraws from Gaza, dismantling settlements but retaining control over its borders. This withdrawal, rather than promoting peace, eventually strengthens Hamas, which wins the Palestinian legislative elections in 2006, deepening divisions between Gaza (under Hamas) and the West Bank (under the Fatah-led Palestinian Authority).

In Lebanon, tensions flare dramatically in 2006 when Hezbollah captures two Israeli soldiers, sparking a destructive 34-day conflict. The war devastates Lebanon's infrastructure, kills over a thousand Lebanese civilians, and highlights Hezbollah's military capabilities and resilience. This conflict underscores persistent instability and the increasing influence of Iran via its Lebanese proxy.

The September 11 Attacks and the War on Terror

The terrorist attacks of September 11, 2001, dramatically transform U.S. involvement in the Middle East. The subsequent "War on Terror" begins with the invasion of Afghanistan in late 2001, but swiftly impacts the entire Middle East. States such as Saudi Arabia, Qatar, Bahrain, and Kuwait find themselves balancing cooperation with the U.S. against growing domestic opposition to American presence in the region.

Increased scrutiny on Saudi Arabia, due to many attackers' Saudi origins, pressures the kingdom to confront internal extremist elements. Radical Islamist groups and their sympathizers grow increasingly hostile to regional governments closely aligned with the West.

The 2003 Iraq War and Regional Aftershocks

In March 2003, a U.S.-led coalition invades Iraq, toppling the regime of Saddam Hussein within weeks. The stated objective—eliminating Iraq’s alleged weapons of mass destruction—proves unfounded. The invasion dismantles the Iraqi army and governmental structures, creating a security vacuum that rapidly descends into insurgency, sectarian violence, and civil conflict.

Sectarian divisions between Sunni and Shi’a communities erupt violently, exacerbated by the power vacuum and Iranian-backed Shi’a militias. Al-Qaeda in Iraq (later evolving into the Islamic State of Iraq) emerges, exploiting Sunni grievances against the newly empowered Shi’a majority government. By 2006–2007, Iraq faces intense sectarian violence, prompting U.S. forces to implement the "surge" strategy, temporarily stabilizing the situation but at great cost.

Iran: Rising Regional Influence

Iran benefits geopolitically from the Iraq war. With Saddam Hussein’s Sunni-led regime gone, a predominantly Shi’a government comes to power in Baghdad, substantially enhancing Iranian influence. Iran actively supports Shi’a militias, extending its strategic depth into Iraq. Simultaneously, under President Mahmoud Ahmadinejad (elected in 2005), Iran intensifies its nuclear program, generating international concern and leading to escalating sanctions and tensions with the West and Israel.

Syria Under Bashar al-Assad

In 2000, following Hafez al-Assad’s death, his son Bashar al-Assad assumes power in Syria. Initially perceived as a reformer, Bashar quickly reverts to authoritarian policies, maintaining a tight grip through security forces. Despite pressure following the assassination of former Lebanese Prime Minister Rafic Hariri in 2005—widely attributed to Syrian involvement—Damascus retains significant influence in Lebanese politics. Under international pressure, Syria withdraws its military from Lebanon in 2005, ending nearly three decades of occupation, though continuing covert influence through Hezbollah and other political allies.

Lebanon's Internal Struggles and Foreign Influence

Following Syrian withdrawal, Lebanon faces deepening internal division between pro-Western groups and pro-Syrian factions led by Hezbollah. The 2005 assassination of Rafic Hariri polarizes the country into two opposing political coalitions: the pro-Western, Sunni-led March 14 alliance, and the pro-Syrian, Hezbollah-led March 8 alliance. Political paralysis and periodic violence become common, threatening Lebanon’s fragile stability and sovereignty.

Gulf States: Economic Expansion and Geopolitical Importance

The Gulf Cooperation Council (GCC) states, notably Qatar, Bahrain, Kuwait, and especially the United Arab Emirates, experience massive economic growth due to soaring oil prices in the mid-2000s. Dubai emerges as a global financial and commercial hub, investing heavily in infrastructure and tourism. Abu Dhabi and Qatar similarly leverage immense hydrocarbon wealth, enhancing their global diplomatic and economic profiles.

Saudi Arabia grapples with internal challenges, including extremist threats and domestic demands for reform, while maintaining close strategic relations with the U.S. Bahrain and Qatar host large American military bases, underscoring their strategic roles.

Turkey: Internal Change and Regional Ambitions

Turkey under the Justice and Development Party (AKP), led by Prime Minister Recep Tayyip Erdoğan from 2003, experiences significant political, economic, and diplomatic transformation. Turkey pursues European Union membership negotiations (officially beginning in 2005), while simultaneously asserting itself as a regional mediator in Middle East conflicts, including between Syria and Israel.

Domestically, Erdoğan's government implements economic reforms leading to unprecedented growth but also faces criticism for growing authoritarian tendencies and contentious Kurdish policies, as clashes with the Kurdistan Workers' Party (PKK) continue sporadically.

South Caucasus: Armenia, Azerbaijan, and Georgia

In the Caucasus, Armenia and Azerbaijan remain locked in a stalemate over Nagorno-Karabakh, with periodic skirmishes along their shared border, though no resolution emerges during this period.

Georgia sees significant change under President Mikheil Saakashvili, who leads the pro-Western "Rose Revolution" in 2003. His reforms, aimed at reducing corruption and seeking NATO and EU integration, lead to increasing tensions with Russia, which supports separatist movements in Abkhazia and South Ossetia.

Legacy of Instability and Realignment (1996–2007)

The era from 1996 to 2007 leaves a mixed legacy in the Middle East. While economic prosperity enriches some Gulf states, the broader region experiences severe instability due to unresolved conflicts, failed interventions, and persistent authoritarianism. The second intifada, the Iraq War, and Hezbollah-Israel conflicts underscore unresolved territorial and sectarian tensions, fueling deep-seated grievances.

The period sees increased Iranian influence, enhanced sectarian divisions, and expanded American military presence, reshaping geopolitical alignments. The turbulence further weakens hopes for lasting peace, laying the groundwork for ongoing conflicts and instability that continue into the next decades.

Shimon Peres seeks to accelerate an Israeli-Syrian deal but soon concludes that such an agreement cannot be reached quickly, if at all.

In early April, Syrian and Iranian-backed Hezbollah fighters fire Katyusha rockets at Israeli border towns and villages.

Accused of weakness in fighting terror (and in the midst of a tough election campaign), Peres responds by unleashing a major military action.

For seventeen days, Israeli air force and artillery units pound Hezbollah positions and Lebanese strategic installations.

There is an international outcry when Israeli gunners inadvertently hit a UN post sheltering hundreds of civilians at Qana, Lebanon, killing some one hundred Shi'ite refugees who had taken shelter there.

After nearly three weeks of fighting, U.S. Secretary of State Warren Christopher brokers a new cease-fire agreement, which prohibits attacks on civilians as well as strikes across the border into Israel. (Differing only marginally from the agreement brokered by the U.S. after Israel's almost identical operation in July 1993, it does not put a stop to the low-level ongoing fighting in southern Lebanon).

The most volatile of Israel's borders remains that with Lebanon.

Fighting between Israel and the Iranian- and Syrian-backed Hezbollah troops in southern Lebanon takes a heavy toll.

Seventy-three Israeli military personnel are killed on their way to Israel's self-declared security zone in a helicopter crash in February.

Former deputy foreign minister Yossi Beilin, of the Labor Party, places himself at the head of a popular movement for Israeli withdrawal from south Lebanon on November 9.

In response, Major General Antoine Lahad, commander of the Israeli-backed South Lebanese Army (SLA), warns that if Israel abandons him and his men, they might join the Hezbollah.

Israeli spokespersons insist that a unilateral pullback would put Israeli towns and villages at risk.

They argue that a withdrawal is possible only in the context of a wider peace deal with Syria, the one power in the area that can control the Hezbollah.

Peace talks between Israel and Syria remain frozen, however, as Netanyahu refuses to continue the negotiations begun by the previous Labor government.

Israel has reduced the activity of its ground forces in the fighting in Lebanon and relied more on air power, which seems to have a deterrent effect.

In early January, the Cabinet authorizes in principle a new policy of retaliation against Lebanese infrastructure targets in response to Hezbollah Shi'ite fighters' shelling Israeli civilians.

In early 1999 also, after a legislative defeat on the budget, Benjamin Netanyahu calls for early elections and soon suspends the Wye agreement.