We'll See How Short Sharon's Fuse Really Is.(Ariel Sharon)

For Ariel Sharon, it was a clear sign that his enemies would not be intimidated. Just two days after his landslide victory in the Israeli election, Palestinian bombers packed 30 pounds of explosives into the trunk of a stolen Ford Fiesta and parked the car in the heart of Beit Yisrael, a densely populated religious neighborhood in Jerusalem. Their apparent aim: to catch hundreds of Hasidic yeshiva students as they streamed out of the buildings from their late-afternoon prayers. But the terrorists mis-set the bomb's timing device by 15 minutes. When it exploded at 4:45 p.m., most Beit Yisrael residents were indoors, and the blast only slightly injured five people. Hours later a previously unknown group calling itself the Palestinian Popular Resistance Forces claimed responsibility for the attack, which it said was carried out in memory of 800 Palestinians massacred in the Sabra and Shatila refugee camps during the Sharon-led 1982 invasion of Lebanon. "This is the first message to the criminal and fascist Sharon," read a leaflet from the group.

It was an ominous beginning to the Sharon era. Before the incoming prime minister had even formed a government, Palestinians seemed to be telling him in words and deeds that he would have to deliver more concessions than even his predecessor Ehud Barak had offered--or risk a widening conflagration. In the West Bank, the Jewish settlement Psgot came under withering gunfire Thursday night for the first time in six weeks; in Ramallah, hundreds of youths clashed with Israeli soldiers on Friday; the street battles included tank fire, and left several injured. In Gaza, the head of the militant Islamic Jihad group pledged to continue the bombing campaign as part a wider jihad. "The choice of holy war will never stop," said Islamic Jihad leader Abdallah al-Shami.

The trouble is nothing new: bombings and clashes have formed the backdrop for years of Israeli-Arab peacemaking. But the election of Sharon--one of Israel's most unbending politicians--could alter the balance. Sharon insists he will negotiate with the Palestinians only on his terms--demanding first an end to the violence that has raged for the past four and a half months. Many Israelis believe that strategy will curb Palestinian violence. Others fear it will give it new momentum.

Sharon doesn't have free reign. His policy will depend largely on the look of the government he is able to put together. Because Likud has only 19 seats in the 120-seat Knesset, the new prime minister can't rule without forming a stable coalition. Last week Sharon put out feelers to both right-wing allies in the Knesset and more moderate Labor Party leaders, who favor continuing dialogue with the Palestinians. He even met with outgoing Prime Minister Ehud Barak, though officials said the talks focused on an orderly transfer of power. Sharon's preference: a "unity government" in which Labor stalwarts such as Shimon Peres would hold key cabinet posts. "Sharon badly needs a deal with Labor to show the world that he's not so extreme," says Ze'ev Shiff, a political columnist for the Israeli daily Ha'aretz. But some powerful left-wing Laborites, including Justice Minister Yossi Beilin, oppose a deal with Sharon, and warn that the party could break apart if Labor leaders opt to join Likud. Should negotiations with Labor ...