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Steve Simon at the Council on Foreign Relations assesses the likelihood and possible consequences here. His conclusion:

Israel is not eager for war with Iran, or to disrupt its special relationship with the United States. But the fact remains that it considers the Iranian threat an existential one and its bilateral relationship with the United States a durable one, and will act if it perceives momentous jeopardy to the Israeli people or state. Thus, while Israel may be amenable to American arguments for restraint, those arguments must be backed predominantly by concrete measures to contain the threat and reaffirmations of the special relationship, and only secondarily by warnings of the deterioration of the relationship,to be persuasive.

It's interesting to note that just as Vice President Biden arrived in Israel pledging American support for Israel in no uncertain terms, he got this:

Hours after Vice President Joseph R. Biden Jr. vowed unyielding American support for Israelâ??s security here on Tuesday, Israelâ??s interior ministry announced 1,600 new housing units for Jews in East Jerusalem, prompting Mr. Biden to condemn the move as â??precisely the kind of step that undermines the trust we need right now.â?

Prime Minister Benjamin Netanyahu was clearly embarrassed at the move by his interior minister, Eli Yishai, head of the right-wing Shas party who has made Jewish settlement in East Jerusalem one of his central causes.

A statement issued in the name of the Interior Ministry but distributed by the prime ministerâ??s office said the housing plan was three years in the making and that its announcement was procedural and unrelated to Mr. Bidenâ??s visit. It added that Mr. Netanyahu had just been informed of it himself.

Mr. Netanyahu supports Jewish settlement in East Jerusalem yet wants to get new talks with the Palestinians going and to maintain strong relations with Washington. But when he formed his coalition a year ago he joined forces with several right-wing parties, and has since found it hard to keep them in line.

Leave aside the issue of settlements, what does this tell us about Washington's ability to persuade Israel to tow our line? If we can't convince them not to build a few hundred houses in a politically sensitive location, can we really convince them to live with a nuclear-armed state that they consider an existential threat?

UPDATE: Daniel Larison offers an answer:

Thatâ??s a fair question, but I think putting the question this way overlooks the enabling effect that the stated â??no spaceâ? guarantee to Israel has on the behavior of the Israeli government. This relates to the application of the idea of moral hazard to foreign policy that Leon Hadar proposed and I have mentioned before. Many Americans might reasonably assume that by making unconditional, explicit security guarantees to Israel Washington could expect greater flexibility and accommodation from the Israeli government on points of contention, but this is not how it works. The moral hazard of unconditional backing is not only that the ally being supported will engage in reckless behavior, but that it does so knowing that it will pay no real price for this behavior as far as the relationship with the U.S. is concerned. The temptation is to focus criticism on the ally that is taking advantage of this, but the one deserving the most blame is our own government.