Reeling from the Lebanon debacle, Arafat signed an agreement with King Hussein in February 1985 that for the first time since the 1974 Rabat conference acknowledged a Jordanian role in the peace process. The PLO wanted to participate in a joint peace delegation with Jordan, but the king's price for inclusion was acceptance of Resolution 242, renunciation of terrorism, and explicit recognition of Israel's right to exist. When at the last minute Arafat backed out of a commitment to fulfill these conditions, Hussein severed the accord a year after it was signed.

The 1984 Israeli elections resulted in a politically paralyzing arrangement known as a ''national unity government,'' in which Labor and Likud agreed to share power rather than align themselves with less stable fringe parties. After serving as prime minister for two years in a rotational agreement with Likud leader Yitzhak Shamir, Foreign Minister Shimon Peres struck a deal with King Hussein in April 1987. Meeting secretly in London, Peres and Hussein agreed to an international conference (which Hussein believed was necessary to confer legitimacy on any agreement) that would serve as an umbrella for separate bilateral talks between Israel and its neighbors.

The so-called ''London agreement'' precluded the conference from imposing, vetoing, or otherwise hindering any solutions reached by the parties. Shamir remained implacably opposed to any kind of multilateral peace negotiations, however, and immediately rejected the agreement, proposing instead that a superpower-sponsored summit with Hussein serve as the basis for direct talks with Jordan. When Hussein rejected this idea, the London Agreement disintegrated and the Palestinian issue seemed to slip off the agenda of an Arab world increasingly pre-occupied by the Iran-Iraq War.

Increasingly marginalized, local Palestinians took matters into their own hands and permanently changed the dynamic of their conflict with Israel. A December 1987 traffic accident in northern Gaza served as the catalyst for a series of riots that quickly erupted into a general uprising throughout Gaza and the West Bank. Misjudging the depth of Palestinian anger and desperation, Israeli officials initially dismissed the unrest as merely the latest in a series of periodic disturbances. When traditional crowd-control methods failed to curtail the demonstrations, Yitzhak Rabin (then defense minister) initiated a policy of ''force, might, and beatings'' designed to intimidate the mostly young, male Palestinian rioters.