UPDATE: Wed., 1 p.m. (EST)  -- Shortly after this was filed, Israel and Hamas agreed to observe an Egyptian-brokered cease-fire. 

Letter from Tel Aviv

For a short time last night a ceasefire between Hamas and Israel looked imminent. Egypt seemed to be playing a constructive role as mediator. Secretary of State Hillary Clinton had arrived to add the U.S.’s weight to an agreement.

But the missile fire from Gaza didn’t stop. Nor did the bombing by Israeli warplanes.

By this morning an agreement looked remote. A bomb exploded on a civilian bus in Tel Aviv, injuring 22 people, at least three critically. It was  the first such episode of its kind in six years. Israel stepped up aerial bombing of military targets in Gaza, as Israeli ground troops stood poised for a possible invasion.

In Tel Aviv, Israel’s largest city, mothers pushed carriages, traffic stacked up at interchanges, the population tried to stay calm as reporters delivered minute-by-minute updates on missiles and diplomacy via radio, TV and Internet. I shopped at a neighborhood candy store with my family for our niece’s wedding, scheduled to take place this Friday.

Everyday life struggled to proceed normally, against a background of rising tension and violence. For its 64 years of existence, Israel has faced existential military crises seven or eight times, so the feeling isn’t new for us old-timers.

The most important new player in the latest round of conflict is Israel’s “Iron Dome” anti-missile system, which passed an important first test by downing nearly 400 short-range missiles fired from Gaza. Iron Dome wasn’t perfect: a handful missiles penetrated the umbrella, killing an Israeli soldier and a handful of civilians.

But the new anti-missile technology, developed by Israel’s Raphael defense corporation, represents an effective counter-thrust. Israel is determined to neutralize the increasingly sophisticated weapons smuggled to Gaza and southern Lebanon from Iran.

Whether “Iron Dome” will push diplomacy forward is only a guess. Missiles from Gaza are meant not just to terrorize Israel, but also to drive a wedge between Israel and Egypt.

The critical question is whether the new “Arab Spring” regime in Egypt, led by Mohamed Morsi, will continue to honor the letter and the spirit of the 1979 Peace Treaty with Israel, signed by the late Egyptian president Anwar Sadat. Sadat two years after the treaty was assassinated by fundamentalist Egyptian officers, following a call for his death by the blind Islamic religious leader, Omar Abdel-Rahman. Rahman now is serving a life sentence in North Carolina for the 1993 bombing of the World Trade Center.

Morsi is on the spot: Gaza wants his support for a continued campaign against Israel. No doubt Secretary of State Clinton spelled out the U.S. desire for peace and non-violence.

Morsi can decide to heed the U.S. and restrain the Hamas in Gaza, which could provoke the same extremism that cost Sadat his life. Or he may tiptoe between the expectations of the U.S. and Gaza. In the Middle East, such tiptoe-ing is tricky and often ends badly.