It began with the opening of a tunnel at a religious site in Jerusalem. The tunnel had been excavated covertly under a previous government, but its opening had been repeatedly postponed. This was because it was likely to be seen as a gross provocation by Palestinians. Attendants hand out Jewish skullcaps at the entrance of the tunnel, emphasising its religious significance. The exit, however, is in the Muslim quarter, so the tunnel is seen as an extension of the Jewish religious site, disrupting the religious status quo in the city. The opening was authorised by Israel's new, hard- line Prime Minister, Benjamin Netanyahu. He, however, does not accept responsibility for the violence, but blames Yasser Arafat, leader of the PLO, who he says encouraged the violence to put pressure on Israel.
Why did it become so violent?
It is clear that the Israeli government was caught by surprise by the scale of the Palestinian demonstrations. Mr Netanyahu, who gives priority to influencing foreign public opinion, was half-way through a European tour when the crisis erupted. The army was equally unprepared, and its response was panicky and violent. It claimed that the first shots came from the Palestinian side during a demonstration in Ramallah on Wednesday in which four Palestinian police were killed. But the disparity in casualties on the worst day of violence - 800 Palestinians killed and wounded compared with 70 Israelis - suggests that the Israeli army threw itself into the fighting with vigour. In many ways the Israel government and army behaved as they had during the Palestinian intifada (uprising) in 1987-92, when they were prepared to shoot to kill with live ammunition when demonstrators threw stones.
The difference this time was that the demonstrators were backed by 30,000 Palestinian Authority police with light infantry weapons. They fired back at Israeli forces, killing 14 soldiers and border guards. Again unlike the intifida, Israeli troops could not pursue demonstrators into Gaza or the six cities of the West Bank which gained autonomy in 1994-95. "When the Israelis left we had hundreds of weapons. Now we have thousands," said Marwan Barghouti, the general secretary of Fatah, the largest Palestinian political movement on the West Bank.
What has happened to the peace process?
It stopped in its tracks with the suicide bombs which killed 62 people in Israel in February and March. Those bombs ensured that the Labour government, which had started the Oslo peace process in 1993, lost the general election and that Mr Netanyahu became prime minister. He never concealed that he thought the Oslo accords a mistake.
During his first 100 days in office, Mr Netanyahu simply sat tight, not openly tearing up the accords, but not putting them into effect either. He delayed Israeli withdrawal from the town of Hebron and the release of prisoners, and, for a long time, he refused to meet Mr Arafat. In the meantime, the West Bank and Gaza remained closed by Israel, which effectively threw tens of thousands out of work. Many were close to starvation. Anger and frustration among Palestinians was mounting.
What is to stop the Israeli army crushing the Palestinians?
Israel has the tanks and the helicopters to take over Gaza and the West Bank towns. But it would suffer casualties - something Israelis do not like - and even then it is unlikely that the Palestinians would stay crushed for long. It was one of the lessons of the intifada that Israel could not keep the lid on a restive West Bank and Gaza; the harder they struck, the more violence resulted and the international community became outraged. That was one reason why Israel signed the Oslo accords in 1993.
What happens next?
The US wants a series of meetings between Mr Netanyahu and Mr Arafat. Mr Arafat wants these meetings to cover all issues, including the Israeli withdrawal from Hebron and the tunnel. Mr Netanyahu, however, says he will not close the tunnel and that he will not make concessions under pressure from violence.
This has the makings of another deadlock, but Mr Netanyahu will be under heavy pressure from the US, West Europe and the Arab world to restart the Oslo process. His most likely tactic will be to say he will take Mr Arafat and the Palestinian Authority more seriously in future and then play for time, hoping the demonstrations and violence run out of steam.
Will this happen as he hopes?
A line was crossed last week when Palestinian police opened fire on the Israeli army. At some point it will happen again. And things could well get worse in another way. Palestinian anger is at a peak. It is likely that Hamas and Islamic Jihad, the Islamic militant organisations, will see more suicide bombs as a way of gaining public support.
What does Mr Netanyahu really want?
Nobody knows. Certainly not his cabinet. In one sense the crisis this week is about Benjamin Netanyahu and not about the tunnel under the Old City. He is an immensely effective political campaigner, but his wider political views remain a mystery. He comes from a right-wing Zionist family and in his books he says that the way to deal with Arabs is to take a tough line and wait for them to make concessions. But he is also known for making concessions suddenly under pressure. One thing that has become clear is that he likes power and has shown little inclination to share it with former allies in his cabinet, relying on advisers wholly dependent on himself.
What do Israelis think?
Some will condemn him for thinking the Palestinians could be safely ignored. But others, possibly a majority, will blame the previous Labour government for allowing Mr Arafat to have his own police force and independent enclaves. His political survival is not in doubt.
Where does this leave Yasser Arafat?
Curiously, it leaves him stronger. The uprising last week not only showed Israelis that the feelings of the Palestinians cannot be ignored, but also that Mr Arafat is valuable to them. He demonstrated some ability to stop his police shooting at Israeli soldiers, and that is a form of co-operation he could withdraw. But Mr Arafat is, as he has been since he returned to Gaza in 1994, in an ambivalent position. He needs popular Palestinian resistance to Israel to remain at a high enough level for him to seem a welcome alternative, but without seeming to be covertly abetting those who attack Israel.
A second advantage for Arafat is that the crisis this week has pushed into the background growing Palestinian anger at his own authoritarian rule. The fact the Palestinian police and security shot at Israeli soldiers will reduce Palestinian criticism of their use of torture and of Mr Arafat's authoritarian ways.
Can other countries help?
The US is pushing to get the Oslo peace talks going again. The administration does not like Mr Netanyahu and did everything to keep him out of power. But Mr Netanyahu has strong links with the Republican right and big Jewish political donors in the US. In a presidential election year Bill Clinton will not push him too far, but neither will he want to see the crisis worsen.
West European states have marginal influence. More important is the sense among Arab leaders who supported peace with Israel that they backed the wrong horse. Many are hurriedly distancing themselves from the conciliatory positions they took last year. The Middle East is returning to the cold war which Oslo was expected to end.