Yasser Arafat must be turning in his grave. Barely two and a half years have gone by since his death and already his movement, Fatah, is steadily losing its last strongholds in the Gaza Strip.

For the past few months, on an off, the Palestinians - and with them, foreign media outlets and Israel's intelligence community - have debated whether the situation in Gaza can be termed civil war. The sights of the past several days, including the hesitant rearguard action that Fatah is waging against Hamas, evidently removed any lingering doubts. A civil war is raging in the Gaza Strip - and the Islamists have the upper hand.

The outcome in the offing will have far-reaching implications not only for the future of the Palestinian Authority, but also for its relations with Israel, and perhaps for the entire region. The old Palestinian dream of a real state is fading fast. The speech that President George Bush is scheduled to deliver on June 24 (the fifth anniversary of his speech laying out a two-state vision for the Middle East) will have to undergo substantial revision. Hamas's takeover of Gaza, which yesterday seemed closer than ever, is destined to split the territories into two entities that are politically and even culturally separate: Hamastan (the Gaza Strip) and Fatahstan (the West Bank).

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Anyone in Israel side still contemplating the question of a Palestinian partner might also need to do some rethinking. In Gaza, at least, it seems there is nobody left for Israel to talk to. The Rafah crossing yesterday had a long line of Palestinians seeking to leave Gaza. Haaretz received letters from Palestinians asking Prime Minister Ehud Olmert to save them from Hamas.

That, at the moment, looks like the last thing Olmert plans to do. Officials in the government and defense establishment are following developments with grave concern. But Israel, so long as it can afford to, will steer clear of military involvement in Gaza. The directives given to the army's Southern Command talk about a high state of alert and readiness, but also restraint. The Israel Defense Forces will not enter the internal Palestinian conflict unless it is forcibly dragged into it. Qassam rocket fire will not elicit a wide-scale ground incursion, particularly when the chief of staff is still extremely preoccupied with preparing for a possible flare-up in the Syrian arena.

PA Chairman Mahmoud Abbas (Abu Mazen) finally wised up yesterday in describing the latest round of battles in Gaza as "a coup attempt." But his people continued to show themselves utterly helpless in the fighting against Hamas. The Islamic organization took control of entire areas of the Gaza Strip, while Fatah forces were barricaded in the headquarters of the PA security services and feared to step outside.

Particularly glaring is the Fatah leadership's strange absence from Gaza over the past few days. Abbas, Mohammed Dahlan, Rashid Abu Shabak, Samir Masharawi and others are not in the Strip, each with his own excuses. These commanders have adopted the slogan "after you" and left the field commanders to their own devices.

The fact that Hamas was not a party to the rocket fire aimed at Israel yesterday is another cause of concern for Fatah. In the previous rounds of internecine conflict, when Hamas felt it could not win the fight, it turned to the Qassams for a magic solution: diverting the tensions in Israel's direction. But this time, Hamas apparently believes it is on the verge of a historic victory, as early as within the next two days. To that end, on Monday it announced a call-up of all its militants and began implementing an orderly plan of action whose stated object is to eliminate Fatah in the Gaza Strip.

The battle may be decided today. Yesterday, there were signs that Fatah was gradually giving up on barricading some of the smaller regional headquarters and instead holding onto several larger headquarters located close together in Gaza City and the vicinity. If this area falls to Hamas, it could spell the end of Fatah in the Gaza Strip. And if Fatah manages to fight back, we will likely witness a resumption of Hamas rocket fire on Sderot.