The International Crisis Group (ICG), a conflict-resolution organisation, said on Thursday that although the political transition after the death of Yasir Arafat has got off to a healthy start, this may not last long.
An atmosphere of goodwill between the Israeli and Palestinian leaderships and harmony over Palestinian reform and Israeli withdrawal from occupied Palestinain land should not create a false sense of security, said the Brussels-based organisation.
This is because there are many suppressed rivalries awaiting the new leadership's first slip to reassert themselves.
And on the Israeli side, tensions raised by the forthcoming Gaza withdrawal - and the prospect of widespread settler and right-wing efforts to thwart it - could also pose a threat to peace.
All eyes are on the results of the
municipal and presidential polls
All eyes, said the ICG, are therefore are on the 9 January presidential election, which Palestinian Liberation Organisation chief Mahmud Abbas is expected to win.
"As president, Mahmud Abbas will have to prove to Palestinians he can deliver, and he probably has to do so in his first three months on the job," Mouin Rabbani, an ICG Middle East analyst, says.
"If he fails to improve daily life and offer the hope of a political settlement - and here Israel and the international community need to deliver as well - the situation is likely to quickly revert to chaos and conflict."
The future Palestinian leader will need to revitalise the political system by reforming institutions and incorporating Islamic groups within it, the report said.
This must be done within the framework of a negotiated two-state settlement.
"If he [Mahmud Abbas] fails to improve daily life and offer the hope of a political settlement ... the situation is likely to quickly revert to chaos and conflict"
Middle East Analyst,
International Crisis Group
The ICG added that while Palestinians are hungry for the rule of law and thirsty for functioning institutions, they are equally desperate for political progress on issues such as settlement construction, the separation barrier and an end to Israeli occupation.
"Defects in Palestinian democracy did not cause the Israeli-Palestinian conflict any more than addressing them will resolve it," Robert Malley, director of the IGC Middle East/North Africa Programme, said.
"While international support for Palestinian reform is welcome, it ought not to come at the detriment of simultaneous moves on the political front, lest the new Palestinian leadership rapidly lose whatever legitimacy elections will bring."