The redeployment of Iranian warships across the Suez Canal and the uprising in Libya sent waves across global energy markets. The Dow dropped nearly 200 points yesterday; the price of oil is nearing $100 a barrel.

And clashes between demonstrators and security forces in the Middle East continue.
U.S. diplomatic efforts have put a positive spin on things, with President Obama and Secretary of State Hillary Clinton playing nice with others, refusing to put forth any strong demands to former allies. But their positive approach ignores the potential negative ramifications of what could be called The Fall of the Middle Eastern Wall.

As Middle Eastern leaders struggle to survive, they may emerge from an initial state of shock to counter both internal and external attempts to overthrow their governments. Fearing increasing bottom-up demands that undermine their power, ruling oligarchies are unlikely to offer significant political or economic concessions. However, as Arab autocratic regimes face intense scrutiny, they may resort to conflict mongering as a means to redirect the anger of their constituencies toward external enemies. Should pro-democracy demonstrations persist despite the brutal use of force, ruling elites may choose to evoke nationalistic and fundamentalist emotions in order to mobilize ‘the street’ against those enemies. Therefore, the demonstrations may lead to military provocations  -- and a greater risk of war.

Such a scenario should also be evaluated given the relatively weak state of Western governments. The slow economic recovery in the U.S. and Europe leaves the West susceptible to any hint of turmoil, a growing hike in oil prices and the ensuing market volatility. Consequently, some countries in the Middle East may now become less deterred from pursuing aggressive and defiant policies. Coupled with the fact that some moderate Arab regimes feel alienated by the reaction of Western partners during recent weeks, we may witness the creation of new regional alliances with Iran, beyond Syria and Turkey.

On the other hand, the U.S. may be driven to war for these exact reasons. One should not dismiss a scenario whereby the Obama administration feels obligated to act, should it realize that pro-democracy demonstrations in Iran have failed while Iran’s nuclear program approaches a culmination point. Moreover, should the administration witness a severe downturn in the economy while Congress is in a deadlock with regard to further stimulus and budget cuts, it might consider opening a new military front. Such a move would seem to justify breaching the budget deficit ceiling while subsequently providing economic stimuli by way of consensus prior to the 2012 elections.

Some prominent figures have argued that Arab-Israeli peace accords should be pursued as a means to help promote stability and ensure the regional system reaches a desirable equilibrium. Unfortunately, a peace initiative may become unlikely should newly formed Arab regimes take the ideology of “anything but the old regime’s policies.” As a consequence, the Palestinians will lack the broad clear Arab support that is essential to legitimize concessions. At the same time, Israelis are likely to entrench themselves within the right-wing security-focused narrative in view of increasing regional uncertainty. In the absence of appropriate conditions leading to a peacemaking initiative, the probability of conflict may increase substantially.

A possible way to avoid conflict and its ramifications is to construct a comprehensive economic development transition plan for the region that will benefit the peoples of the region, as well as global economic interests. Such a plan should be backed by the existing substantial regional resources, as well as international funds that would be redirected from traditional budget allocations that served the so-called old order.

In addition, a significant multinational presence should be deployed, in order to deter all regional parties from taking irresponsible steps. It is at this point in time, before cross-border conflicts arise and while seizing a change to build on growing pro-democratic momentum, that concrete measures should be taken and a ‘Marshall Plan’ for the Middle East introduced. The cost of such a wide-scale plan will be marginal as compared to the damage that a chaotic process will cause.

Eylon Javetz, an independent strategic consultant based in New York City, is a former peace broker and policy planner who participated in Arab-Israeli negotiations.