Call it inconceivable—if not unthinkable. In international politics, today’s impossibilities have a habit of becoming tomorrow’s realities.

If Donald Trump still harbors ambitions for a Nobel Peace Prize, he may be looking in the wrong direction. Even significant normalization agreements between Israel and Lebanon—or a historic breakthrough with Saudi Arabia—would fall short. The truly transformative, and politically unthinkable, breakthrough would lie elsewhere: an Israeli-Iranian peace agreement in exchange for the establishment of a Palestinian state.

At first glance, the idea borders on fantasy. Iran is not merely another adversary; it is widely perceived in Israel as an existential threat. Yet precisely because of that, peace with Iran would carry a strategic weight unlike any prior diplomatic initiative. And if such an offer came with a condition, Israeli agreement to the establishment of a sovereign Palestinian state in the West Bank and Gaza, it would force Israel into a decision it has long managed to avoid. For Iran, the implications would be equally profound: a redefinition of a revolutionary identity in which opposition to Israel has long been central.

What is envisioned here is therefore not a conventional diplomatic breakthrough, but a dual ideological rupture, one that would challenge the foundational narratives of both states. Such transformations are rare in international politics. They tend to occur not through gradual diplomacy, but under the pressure of strategic exhaustion or systemic shock.

To see how such a shift might occur, it is worth recalling an earlier moment when Israeli public opinion seemed immovable, until it wasn’t. Before Anwar Sadat’s historic visit to Jerusalem in 1977, the idea that Israel would relinquish the Sinai Peninsula was deeply unpopular. Sinai was not just territory; it was a strategic buffer, a symbol of victory after the Six-Day War, and home to Israeli settlements and military infrastructure. By the time of the Camp David Accords, a majority of Israelis supported full withdrawal from the Sinai.

Today, however, those conditions appear absent. Since the October 7 attacks, and amidst the direct war with Iran, Israeli society has been traumatized. The effects are visible: heightened threat perception, a collapse of trust in adversaries, and deep skepticism toward diplomatic solutions that involve territorial compromise. Polling consistently shows that only a small minority of Israelis believe that a Palestinian state could coexist peacefully alongside Israel.

Under such circumstances, a proposal linking peace with Iran to Palestinian statehood would likely be met, at least initially, with outright rejection. Many Israelis would view it as a trap, as was the case before Sadat arrived in Israel. Further, it would be viewed as an attempt by Iran to achieve through diplomacy what it has failed to achieve through confrontation. The idea that Tehran could abruptly transform from a principal adversary into a peace partner would be completely unbelievable.

The Israeli right’s reaction would be predictable: a sweeping rejection, framed through the lens of Oslo and the Gaza disengagement as cautionary precedents against “surrender.” The real question, however, is whether the broader public might still be willing to engage with the idea on its merits.

Wartime psychology does not simply harden positions; it can also create the ripe conditions for dramatic shifts. The same trauma that deepens distrust can, under the right circumstances, generate openness to sweeping change, if that change promises a decisive end to insecurity. This was, in part, the dynamic that followed the Yom Kippur War.

For Israel, the primary benefit of such a deal would be the potential neutralization of the “Ring of Fire”—the network of proxies from Hezbollah to the Houthis that currently stretches its defense resources to a breaking point. By addressing the Iranian threat at its source, Israel would trade an exhausting, existential shadow war for a historic “peace dividend” of regional stability.

Crucially, this would offer Israelis an opportunity for the first time to look beyond the immediate horizon of the next war. It would present the chance to see not another cycle of mobilization, but the “normal existence” that David Ben-Gurion envisioned for the nation at its founding.

From Iran’s perspective, such an initiative would not be an act of goodwill but of strategic calculation. A peace agreement with Israel, especially one tied to Palestinian statehood, would allow Tehran to recast itself from a regional disruptor into a central diplomatic actor, even a broker of historic change.

The potential economic benefits would be significant. Years of sanctions have weakened growth, reduced oil exports, and fueled inflation, while isolating Iran from global markets. Moreover, the current war has caused significant damage to its infrastructure. A diplomatic breakthrough could open pathways to investment, trade, and reconstruction. In that sense, peace would function not only as a political achievement but as an economic strategy.

On the other hand, the current regime might look at peace with Israel as a threat to its own existence. The “Zionist enemy” has long served as the central external threat used to justify domestic repression and the prioritization of the security apparatus. Trading a state of permanent war for a diplomatic settlement would require the regime to reinvent itself, a shift that many hardliners may fear is a prelude to their own demise.

For decades, the dominant assumption in diplomacy has been that resolving the Palestinian issue would unlock broader regional peace. But what if the reverse were true? What if a comprehensive regional breakthrough, even one involving Israel’s most formidable adversary, were the key to forcing a resolution of the Palestinian question?

Such a possible breakthrough, however, sits beyond the reach of the United States acting alone. While Washington remains the indispensable guarantor for Jerusalem, it lacks the necessary leverage in Tehran to secure a similar leap of faith. In the shadow of the current war, a durable agreement could require a multipolar mediation team in which China and Russia, Iran’s principal allies, would serve as reciprocal guarantors for the Islamic Republic.

Ultimately, any such grand realignment remains a distant vision until a more durable ceasefire is signed. The current ceasefire talks have nonetheless opened a channel of communication between Tehran and Washington, albeit indirectly through mediators. This could, over time, create space to revisit the long-standing hostility that has defined the relationship.

Whether a disruptor in Washington or a visionary regional leader has the audacity to pursue such a “Grand Bargain” remains to be seen. What is clear, however, is that the old paradigms of incremental diplomacy have reached their limit. A durable peace will not be found in small gestures, but in the reluctant realization that security for one can no longer be bought through the permanent insecurity of the other. If a Nobel-worthy breakthrough exists, it lies in this dual ideological rupture, a painful, necessary disentangling of a century of ghosts that finally allows the living to inhabit the “normal existence” that has eluded the region for generations.

Check out my recently published Op-Ed: Musings on War & Peace in the Middle East and Beyond.

© The Times of Israel (Blogs)