US Working With Saudi Arabia, Egypt On Two-State Solution For Israel And Palestine

The Gaza conflict between Israel and Hamas has taken a new turn with the unveiling of a U.S.-backed peace plan with five Arab states.

What Happened: The latest Arab peace deal's key points were put forward by Saudi Arabia, Egypt, Qatar, among others, with backing from Washington, D.C.

If Israel accepts the deal, Saudi Arabia would return to conversations about recognizing Israel's sovereignty, which were stopped short by the Hamas attacks.

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The plan is still being finalized and is expected to be put forward in the coming weeks, according to the Wall Street Journal.

The proposal will introduce a pathway towards a two-state solution and the return of 136 Israeli hostages still held by Hamas.

The average daily death toll in Gaza has declined over the past month. Since Oct. 7, there have been more than 25,000 Palestinians dead and over 68,000 injured, many of them civilian women and children.

A separate peace deal has been met with rejection from the Israeli government over the weekend, with Prime Minister Benjamin Netanyahu saying that anything but a total victory in Gaza, including the destruction of Hamas, would be considered unacceptable.

While Israeli authorities have acknowledged that there was a deal proposed by Hamas, they have not offered any reassurance that the country will accept any of the proposals or even stop the current military offensive in Gaza.

Why It Matters: Several international heavyweights have argued that Israel's current strategy is not moving forward in the goal of releasing the hostages taken by Hamas during the Oct. 7 attacks.

On Monday, the EU's foreign policy chief Josep Borrell pressed Israel's Netanyahu to work urgently towards a two-state solution, which was backed by German Foreign Minister Annalena Baerbock, Al Jazeera reported.

The comments echo those shared Sunday by the UN's secretary general, António Guterres, who said that the Gazan death toll has become unacceptable, calling for an immediate humanitarian cease-fire in the territory.

On Monday, internal pressure for a ceasefire also grew from within Israel. Protestors stormed the Israeli parliament and demanded immediate action be taken to release the hostages — including accepting a deal with Hamas.

Netanyahu views the formation of an independent Palestinian State as a threat. On Sunday, he rejected a separate U.S.-backed proposal to end the war in exchange for the return of Hamas-held hostages.

"If we agree to this, then our warriors fell in vain," he said in a statement on Sunday. "I am not prepared to accept such a mortal blow to the security of Israel."

Netanyahu spoke to President Joe Biden on Friday, Jan. 19, and said he would deem a ceasefire in exchange for the return of hostages as a defeat.

• The Ishares Msci Israel ETF EIS, which had fallen abruptly in October after the attacks, has already recovered and is up more than 5% since before the Hamas invasion. The fund lost 0.6% on Monday.
• The Ark Israel Innovative Technology ETF IZRL had a similar performance in recent months, and is up 1.1% on Monday.

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