The Palestinians believe they have nothing to lose by fighting on

What is going on is a low-intensity warfare that is creeping into armed conflict between two peoples

Just outside Jerusalem yesterday afternoon, a Jewish settler from Efrat was screaming abuse at a group of Israeli soldiers. His car had been stoned by Palestinian children on a nearby hill. He demanded military intervention at once. "Are you one of the journalists that lies like CNN?" he rounded on me. "You people should write that a rock is like unto a lethal weapon. It's the same as a bullet. Someone who throws a rock at a bus is trying to murder 50 people."

Just outside Jerusalem yesterday afternoon, a Jewish settler from Efrat was screaming abuse at a group of Israeli soldiers. His car had been stoned by Palestinian children on a nearby hill. He demanded military intervention at once. "Are you one of the journalists that lies like CNN?" he rounded on me. "You people should write that a rock is like unto a lethal weapon. It's the same as a bullet. Someone who throws a rock at a bus is trying to murder 50 people."

It was an instructive little outburst for it turned the children on the hill behind Beit Jalla into mass murderers, gunmen without guns, worthy of the biblical fury so beautifully captured in that phrase, "Like unto a lethal weapon". It's obviously not only Palestinians who believe in "days of rage". The anger is just as palpable among Israelis, even if the sense of proportion - or, rather, the lack of it - is profoundly shocking.

Again and again in Israel today, the bestialisation - and fear - of the Palestinians betrays a total inability to grasp reality: you would think that Israel was under Palestinian occupation, that Israelis were being shot down in their dozens by Palestinian "security forces", that Yasser Arafat had taken "time out" from diplomacy.

The truth, of course, is that Mr Arafat - like Israeli prime minister Ehud Barak - has indeed taken "time out". What is going on now in the occupied territories is a form of low- intensity warfare which is, week by week, creeping into an armed conflict between two peoples. The Israelis have no intention of allowing Palestinians a capital in Arab East Jerusalem, the very least Arafat could have accepted at the Camp David conference - and now the Palestinians believe that they have nothing to lose by fighting the Israelis.

A young Palestinian woman who works for one of Arafat's security outfits explained it to me with chilling candour yesterday afternoon. "Arafat has to go on fighting - he mustn't give in now," she said. "The 'intifada' will force the Israelis to understand that Oslo is dead and that only a total withdrawal from the West Bank and Gaza and East Jerusalem will bring peace."

When I pointed out to her that Arafat was not doing the "fighting" - that it was the Palestinians and their various satellite organisations that opposed Oslo who were providing "Palestine" with its dead - she changed her argument. "We must make sure that the people and the Palestinian Authority are united when the real fighting starts," she said.

"Real" fighting? What did that mean? Clearly not the "all-out war" so blithely predicted by journalists who seem to think Ramallah is Stalingrad. But it's not difficult to see why the "intifada" is unstoppable in its present form. Ten years ago, in a prediction derided as being as vicious as it was incredible, Ariel Sharon said that Israeli tanks might one day have to shell Nablus or Ramallah.

Yet now, with Mr Sharon on the verge of returning to the Israeli cabinet, those tanks are indeed shelling Palestinian towns. They fire into Ramallah. Helicopter gun ships rocket Palestinian towns so frequently that their attacks no longer make headlines. And in the feted streets of Gaza, I found not a soul who wants the "intifada" to end. Nor have I found a Palestinian family that does not watch the Lebanese Hizbollah's "Manar" television station, satellited from Beirut, beaming into the occupied territories a constant message: in Lebanon, Israel was driven from occupied land because its people fought for liberation; they believed in God; they were not afraid to die. And now Lebanon is free. Why not the West Bank and Gaza and Jerusalem?

Now this is a powerful but dangerous lesson to send to the Palestinians. For Gaza is not southern Lebanon, and Ramallah and Beit Jala are not Tyre and Sidon. But Oslo has proved so great a betrayal for the Palestinians, their trust so perverted by Israel's continued settlement-building and land- confiscation, and its refusal to allow the Palestinians a capital in part of Jerusalem, that politics is no longer a viable instrument of progress.

Faithfully continuing the bankrupt policy of beating the Arabs into submission, a policy that destroyed Israel in Lebanon, the Israelis respond to stones with bullets and to bullets with missiles. But in their hovels, the Palestinians of Gaza can absorb this punishment. And they know that if the Israelis re-invade all Palestinian land - an idea floated by the more insane Jewish settlers - the Israelis will not be able to absorb this punishment.

So - and here we are using the rubric of the Israelis - does Arafat "control his own people"? The question is pointless - for the Palestinians now control Arafat. Their despair mirrors his own conviction that the Oslo agreement is dead; their fury at the Israeli killing of so many Palestinians parallels Arafat's anger at both the Americans and the Israelis. Their political explosion has happened - it is a fact - and Arafat can only acknowledge it by stating the bottom line for any Palestinian: that the only just peace lies in the direct and total implementation of UN Security Council resolution 242.

He said as much at the weekend. Responding to Mr Barak's call for a "political separation" between Palestinians and Israelis - a demand that Israel has made at least six times in the past seven years - Arafat said that he was "for a political separation that is based on the 1967 borders and international resolutions ... and will lead to the setting up of a Palestinian state". Resolution 242 requires Israel - in return for the security of its state - to hand back to the Arabs the land captured in the 1967 Middle East war: the West Bank, Gaza, East Jerusalem and the Golan. Oslo was giving the Palestinians only parts of the West Bank, only parts of Gaza, none of East Jerusalem, and the inclusion of at least 125,000 settlers inside "Palestine". Arafat did not mention Oslo.

And 242 is probably the only long-term chance for a real peace. Under Oslo, the Palestinians, we were told, would have got at least 90 per cent of the West Bank and Gaza. They would have been able to "share Jerusalem". That is what the world now believes. But it is not true. The maps suggest that the Palestinians may have received only 60 per cent of the land under their control, and Jerusalem was never an offer - only partial control of two mosques and a "capital" in a village outside Jerusalem.

And how do Israelis respond to the Palestinians one month into the new "intifada"? "Palestinians are racist," says a letter-writer to the Jerusalem Post, a paper that ran a feature on child victims last week with the imperishable headline: "Child sacrifice is Palestinian Paganism." Yes, Palestinians are pagans, racists, child-sacrificers, "terrorists", animals, "serpents" (this from Mr Barak last month). But - a tragedy for both Palestinians and Israelis - they are likely to fight on. Can anyone take another look at 242, before it's too late?