JERUSALEM — Fighting in the ongoing Israeli-Hezbollah standoff has been confined to two of the Middle East’s smallest countries, but the outcome could have major strategic implications for the region as a whole.

The dismantling or severe weakening of the Shi’ite militia would be a major blow against global terrorism, rogue states Syria and Iran and possibly even Iran’s nuclear plans, Israeli analysts maintain. But, they warn, if Hezbollah emerges intact as a fighting force, Israeli prestige and the global war on terrorism could suffer significant setbacks.

In the Israeli view, time is of the essence: If the international community does not allow Israel the time it needs to finish the job, the result could be a strategic defeat, analysts say, adding that Washington’s position on the timeframe will be crucial.

The intensive Israeli bombing of Lebanese infrastructure and Hezbollah targets was triggered by Hezbollah’s capture of two Israeli soldiers July 12 in an ambush in which eight other soldiers were killed.

The government decided it could no longer tolerate a situation in which the Shi’ite militia uses its 14,000 rockets to intimidate Israel and make cross-border raids with impunity, confident Israel will avoid sharp retaliation for fear of rocket attacks on its civilian population.

The aim of Israel’s tough military response was to change the rules of the game, Defense Minister Amir Peretz declared last week, adding that Israel would not allow Hezbollah militiamen to return to their border positions or continue to use rockets to threaten Israel.

But there is much more at stake. One of the unstated goals of the operation is to restore Israel’s deterrent capacity: When the dust settles, will Israel be perceived as the fragile spider’s web Hezbollah chief Sheik Hassan Nasrallah likens it to, or as a regional superpower, capable of setting the Middle Eastern agenda? The strong air force response was intended to send the second message.

Some analysts put the stakes even higher, and see in Israel’s fight against Hezbollah the front line in the West’s battle against global terrorism. Maj.-Gen. (res.) Ya’acov Amidror, a former head of research in military intelligence, identifies three strategic gains that would ensue from Hezbollah’s military demise: The capacity of Israel’s enemies to produce terrorism would be significantly reduced; Lebanon would become a truly democratic country, a cornerstone in American efforts to democratize the Middle East; and, most important, the West’s campaign to prevent Iran from becoming a nuclear power would receive a major boost.

“The Iranians use Hezbollah to threaten that if anyone takes action against their nuclear program, the Middle East will burn. Therefore, depriving Hezbollah of its firepower will have a major impact on the struggle to prevent the creation of a nuclear Iran,” Amidror told JTA.

But will the Iranian mullahs allow Israel to achieve such a significant strategic victory? Amidror believes that, for now, there’s little they can do about it.

“The great thing about the situation today is that Iran doesn’t have the capacity to influence what Israel does or doesn’t do in Lebanon. This may not be the case in a few years’ time, so there is wide global interest to allow Israel to act freely in Lebanon before it is too late,” he maintains.

In an interview on Israel Radio, former Mossad chief Ephraim Halevy took a similar view.

“What is happening in the North is an indirect confrontation between Israel and Iran,” he argued. “It will have an impact on the entire Middle East and on the positions and prestige of many regional players. The more clear-cut and significant the Israeli victory, the greater the positive ramifications will be.”

Hezbollah’s decisive defeat would reverberate in Gaza and Tehran. Analysts say that images of destruction in Lebanon could dampen Palestinian terrorist morale and signal to Iran the kind of fate that might be in store for it if it continues to defy the West on the nuclear issue.

International conditions for Israeli action have never been more favorable. In the post-Sept. 11 world, Hezbollah is isolated in the international community. Even Arab countries like Egypt, Saudi Arabia and Jordan blamed the militant group’s “irresponsibility,” rather than Israel, for the current crisis.

Moreover, Syrian troops are no longer in Lebanon, having left after last year’s assassination of former Lebanese Prime Minister Rafik Hariri. And recognizing their interest in striking a blow against global terror and Iran’s long terrorist arm, members of the G-8 industrial nations meeting in St. Petersburg, Russia, issued a joint communique Sunday that seemed to give Israel more time to act.

Former Defense Minister Shaul Mofaz estimated Monday that it would take about another two weeks to achieve a decisive result.

The endgame will depend on the military results on the ground and just how much of Hezbollah’s Katyusha rocket capability Israel is able to destroy. It also will depend on whether Israel feels compelled to send in ground forces to nullify Hezbollah’s remaining rocket power. For now, Iran and Syria are sending Hezbollah messages encouraging it to stand firm.

In a Knesset address Monday, Prime Minister Ehud Olmert outlined Israel’s public conditions for ending the crisis: return of the kidnapped soldiers, an end to Hezbollah rocket fire and the deployment of Lebanese army forces along the border with Israel.

These three conditions are likely to morph into a demand for the implementation of U.N. Security Council Resolution 1559 of September 2004, which calls for the dismantling of all Lebanese militias, including Hezbollah.

The question is whether Hezbollah will be weak enough after the fighting for the Lebanese government, with help from the international community, to be able to impose that kind of solution.

Will Hezbollah militiamen agree to be incorporated into the Lebanese army? And will Israel agree to the dispatch of a multinational force to patrol the border and help impose a cease-fire?

For Israel, the optimal solution would be Hezbollah transformed into a solely political organization, the central Lebanese government in control of all armed forces and a positive modus vivendi between Jerusalem and Beirut.

But, even if the IDF achieves a decisive military victory, it may have to make do with less. Hezbollah and its Iranian and Syrian patrons will do all they can to prevent the group from being stripped of its military power, no matter how the fighting ends.