Israel will drive a hard bargain to halt its offensive in the Gaza Strip, with no truce deal likely unless it crushes Hamas' ability to launch rockets and smuggle in weapons.
For Hamas, the sticking point is the opening of Gaza's borders - something that could cement the Islamic militant group's rule in the impoverished territory.
Despite protests abroad about the deaths of hundreds of Palestinian civilians, the Israeli incursion has overwhelming backing in Israel, where people are eager to deliver a decisive blow to Hamas and restore a sense of normality to the country's rocket-threatened south.
The stakes are particularly high because national elections are only a month away. Israelis are disillusioned with government failures, and showing strength is a good way to boost a politician's fortunes.
With Israeli casualties relatively low and Hamas suffering losses, Foreign Minister Tzipi Livni and Defence Minister Ehud Barak are fast rising in the polls.
This may help explain why the army has mostly refrained from entering heavily populated areas in Gaza, knowing that popular support for the war - and those prosecuting it - could take a major hit if Israeli casualties mount.
Israel is coming under intense international criticism for the fighting, including a UN call for a war crimes investigation into the shelling of a house whose inhabitants said they were taken there by Israeli forces before it was bombed.
Ironically, those waging the war are part of Israel's "peace camp." Livni, Barak and Prime Minister Ehud Olmert, who is about to step down to fight corruption charges, all favour giving up territory to make room for a Palestinian state.
Livni, who seeks to replace Olmert, leads Israel's current peace negotiations with Palestinian President Mahmoud Abbas, whose Fatah movement now runs only the West Bank after Hamas violently overran Gaza in June 2007. Gaza and the West Bank - two territories on opposite sides of Israel - are together supposed to make up a future Palestinian state.
So if Livni and Barak get an electoral boost from the war, as seems likely, they may be able to defeat former Prime Minister Benjamin Netanyahu, whose focus is not on peace talks.
That could make life a lot easier for US President-elect Barack Obama, and for pro-peace forces in the Middle East that have an interest in seeing a weakened Hamas, which gets much of its support from Iran and whose control of Gaza makes an Israeli-Palestinian peace treaty all but impossible.
On its side, Hamas takes a tough line, too. It is looking for more than an Israeli withdrawal from Gaza. It wants the territory's borders opened - and it wants to be recognised as a legitimate player in the Middle East.
Mohammed Nazzal, a senior Hamas official based in Syria's capital, dismissed the UN Security Council's cease-fire resolution by complaining that the militant group did not have a seat at the table when it was drafted.
"Nobody consulted Hamas or talked to Hamas," he told Al-Arabiya television Friday. "Nobody put Hamas in the picture and yet Hamas is required to accept it. This is unacceptable." Osama Hamdan, a Hamas envoy to Lebanon, also dismissed the UN resolution. Hamas "is not interested in it because it does not meet the demands of the movement," he told Al-Arabiya.
Still, a debate is taking place within Hamas over whether to go for a truce - with the Syrian-based leadership rejecting one but with many Hamas members inside Gaza seeing it as their only option.
Hawkish Israelis are calling on the army to use this opportunity to topple Hamas. But that seems unlikely because it would almost surely require Israel to occupy the Gaza Strip indefinitely - just three years after the Jewish state pulled its troops and settlers out of the territory.
With Fatah routed in Gaza, no obvious Palestinian alternative to Hamas exists there and Abbas' people have made it clear they have no desire to retake the territory on the back of Israeli tanks.
For Palestinian lawmaker Hanan Ashrawi, no political benefit can justify the carnage in Gaza, which she said ultimately serves only to undermine peace efforts and enhance Arab extremism.
The Israeli people "seem to have fallen in step, all of them, in one monolithic voice, one unanimous cheering team," she said.
"And it's amazing that they totally dehumanised and abstracted the Palestinians and they detached themselves from the cruelty and the horror of what they're doing."
Israel's government, of course, sees it differently, saying the country "has the full right to protect its citizens."
Hamas, like Israel, rejected the UN resolution calling for an immediate truce.
Shlomo Brom, former chief of strategic planning for the Israeli army, said he thinks "Hamas has a strong interest in going for a cease-fire," but he also doubts they will do so if it is "perceived as a defeat."
"It should be an arrangement that should give them something. And this something will probably be on the matter of the crossings," he said.
The government opposes lifting the blockade of Gaza imposed after Hamas seized power.
Yet opening Gaza's borders to goods and people may be the only way to get Hamas to sign on to a truce - and that, in turn, probably would solidify the group's hold on power.
"Operation Cast Lead will thus turn out to be Hamas' War of Independence," wrote Israeli journalist Aluf Benn.
- News analysis by Steven Gutkin, AP
