This study argues that Hamas and Hizbollah, the two main religious groups fighting Israel, probably are more threatening to U.S. interests than is generally believed. It discusses the various openings that the groups were able to exploit to advance themselves, and particularly how they profited from errors on the Israelis' part. At the same time, the study contends, there has been a corresponding rise of religious radicalism in Israel. This means that on both sides of the struggle--Jewish as well as Arab-- extremism is gaining strength. It is going to be difficult, the study concludes, to avoid a decisive confrontation between the two forces.