Somalia ranks as the country most at risk for failure, according to an annual index that ranks nations in order of their likelihood of collapse.

The past two years, Sudan has held the dubious first place position in the Fund for Peace's Failed States Index. But Sudan is now second to Somalia, which is called the least stable nation in the world.

Iraq, which ranked second in 2007, improved to fifth in 2008, primarily as a result of the surge, according to the index's authors. In contrast, Iran jumped from 57 to 49 over the past year. Zimbabwe and Chad filled out the top five most unstable nations.

Israel grew more unstable between 2007 and 2008, dropping from a position of 75 to 58 in the list of 177 nations. It is the first time Israel ranked in the list of the world's 60 most vulnerable states.

Twelve social, economic, political and military indicators determine how the states are ranked in the list, which is used to develop early warning and performance measures aimed at preventing conflict.

The indicators include: mounting demographic pressures; movement of refugees or internally displaced persons; legacy of vengeance-seeking groups; chronic and sustained human flight; uneven economic development and sharp economic decline; the criminalization and/or delegitimization of the state; deterioration of public services; suspension or arbitrary application of the rule of law and widespread violation of human rights; a security apparatus that operates as a state within a state; rise of factionalized elites; and intervention of other states or external political actors.

The report is a "guide to understand factors that contribute to state failure," Fund for Peace spokesman Mark Loucas told FOXNews.com. It is designed to "stir dialogue and call attention to these pressures (and used) as a tool to promote dialogue between civil society members and journalists in ... the countries with the highest risk."

According to this list, Israel's stability dropped as a result of the increase in all 12 indicators, with the most severe threat being from vengeance-seeking groups. Despite its drop, Israel is not yet at an "alert" stage, the lowest of a four-measure ranking of instability. Iraq is still in the "alert" stage despite its moving up the list.

Only 15 states ranked as "sustainable" — or with the greatest degree of stability. They were Norway, at the top, followed by Finland, Sweden, Ireland, Switzerland, Iceland, New Zealand, Denmark, Australia, Austria, Canada, Netherlands, Luxembourg, Belgium and Japan

The United States and United Kingdom ranked second with "moderate" status, a stability level they've held since 2006. Neither was included in the 2005 survey.

The Fund for Peace is a research and educational organization whose mission is to prevent war and alleviate the conditions that cause war. The 2008 index is the fourth annual report released by the organization.

Click here to read the Failed States Index for 2008.