Last week’s terrorist attack at a Jerusalem yeshiva and the new Israeli national intelligence assessment presented to the cabinet on March 9 underscore the acute security problems Israel faces this year and beyond.

The terrorist shooting spree in the Mercaz Harav yeshiva, which left eight students dead, raised questions about the vulnerability of Jews in western Jerusalem to terrorists emanating from the mostly Arab eastern part of the city. The gunman was from Jabel Mukhaber, a Palestinian village on the southeastern outskirts of the capital.

While the new intelligence assessment downplayed the risk of war in 2008, it painted a gloomy picture of an Iranian-sponsored missile buildup by Syria, Hezbollah and Hamas. It also said Iran is expected to pass the point of no return in creating a nuclear bomb.

As if all this were not enough, Israelis had another, more immediate concern: did the terrorist attack in Jerusalem herald the start of a third Palestinian intifadah?

Internal Security Minister Avi Dichter and the intelligence assessment say no. Dichter says there is no evidence of it, and the assessment says the probability of a widespread, sustained Palestinian uprising in the West Bank is low.

But the report added an important caveat: a new intifadah could erupt if Jewish extremists attack Muslim holy sites on Temple Mount or if new Israel Defence Forces actions in the Gaza Strip cause a high Palestinian death toll.

The fact that the gunman at Mercaz Harav was from eastern Jerusalem has been especially concerning here. There are no barriers or checkpoints to stop Jerusalem’s Arabs from crossing into western Jerusalem.

Since Israel officially annexed the eastern portion of Jerusalem in 1968, Arabs from eastern Jerusalem carry Israeli identification cards, making it easier for them than for West Bankers to slip through police or army cordons. That is why Jerusalem often is seen as a soft target for Palestinian terrorism.

On the flip side, the Palestinian standard of living in Jerusalem is higher than in the West Bank. Moreover, as Israeli residents, the Palestinian Arabs in eastern Jerusalem receive Israeli health care and unemployment services. Many are loath to put their relatively comfortable lifestyle at risk with a campaign of terrorism.

Nevertheless, 20 per cent of Jerusalem’s 220,000 Palestinians have been involved directly or indirectly in terrorism, according to Israeli police sources.

The special status of Palestinian Arabs from eastern Jerusalem makes measures against would-be terrorists difficult. Dichter says he would deport to the West Bank all Jerusalemites involved in terrorism and their accomplices. But legal experts say that because the Arabs in eastern Jerusalem qualify as Israeli residents, Israeli law does not allow such deportations.

Danny Yatom, a member of the Labor party and former Mossad chief, advocates building a fence between Jerusalem’s Jewish and Arab neighbourhoods. But right-wing critics say that would be tantamount to acquiescing to divide Israel’s capital.

In the wake of last week’s deadly attack, the situation in Jerusalem is even more volatile due to the nature of the target.

Mercaz Harav yeshiva, founded in 1924 by then-Chief Rabbi Avraham Isaac Hacohen Kook, is religious Zionism’s most influential theological seminary. It is one of the prime sources of messianic Jewish settler ideology, which sees Jewish settlement of the West Bank and Gaza as a holy mission.

Its rabbis and students are highly critical of the Olmert government’s attempts to negotiate a territorial settlement with the Palestinians, which they believe flies in the face of the divine order.

The alienation of religious Zionists from the government – both because of Olmert’s willingness to negotiate with the Palestinians and perceived past government betrayals, including prime minister Ariel Sharon’s withdrawal of troops from Gaza in August 2005 – has Israeli police worried about Jewish right-wing violence.

Jewish threats aside, Israeli security’s main focus is on the external threats to Israel. They were summed up harshly in the intelligence assessment on Iran.

The Israeli estimate is that without any preventive measures, Iran will be capable of producing a nuclear weapon in late 2009 or early 2010. This, the intelligence agencies agree, constitutes the gravest existential threat Israel faces.

In addressing the threat, the agencies suggest Israel is more or less on its own. They do not expect any U.S. military action against Iran, and they argue that international sanctions are having no effect on the pace of Iran’s nuclear program.

The assessment has a wide regional sweep, providing a country-by-country and issue-by-issue accounting of the updated “threat map” as seen by Israel’s intelligence agencies.

The main points include:

• Lebanon: the Lebanese government is tottering and a real danger exists that Hezbollah will take over the country. If that were to happen, Israel would find itself facing a significantly enhanced Iranian forward base on its northern border. In any event, Hezbollah is preparing for another missile war against Israel, possibly on two fronts: Lebanon in the north and Gaza in the south.

• Gaza: Hamas is building up its rocket capacity, training personnel in Iran and preparing for a showdown with Israel.

• West Bank: Palestinian Authority President Mahmoud Abbas needs to be able to show his constituency achievements on the ground, such as the removal of Israeli checkpoints, if he is to make progress in peace talks with Israel.

• Israeli Arabs: there is a worrying radicalization among Israeli Arabs, evident in demonstrations and stone throwing in response to Israeli military operations against Hamas rocket crews in Gaza.

• Syria: the regime is stable, with President Bashar Assad firmly in control. Assad is focusing on a long-range rocket buildup in an attempt to reach a measure of strategic parity with Israel in the event of peace negotiations between the two countries. He may be ready to break with Iran and the axis of evil in return for a peace deal with Israel that entails the return of the Golan Heights to Syria and massive U.S. economic aid.

The probability of war this year with Syria is low, even though Damascus may still seek revenge for the reported Israeli raid last September on an alleged Syrian nuclear facility.

• Egypt, Jordan and Saudi Arabia: despite ongoing radicalization in the Middle East, there is no threat to the stability of these so-called moderate regimes.