The most important question about the US-Israel-Iran war is no longer one of who has lost. It is obvious that everyone has lost but that Iran has lost less badly than the others.

Nor is it important to ask how humiliating the peace “memorandum” Iran and the US signed this week is for Donald Trump, nor how big a failure the war represents for America. It is obviously very humiliating, but Trump doesn’t care and the problems the failure creates will mostly be passed on to future administrations.

The most important question now is what the future holds for the whole Middle East. The answers to that question do not lie in the text of the memorandum itself but in the behavior in response to it of Israel and Iran. Neither the United States nor its volatile, aging, perhaps weakened President Trump will now be irrelevant, of course, but America and Trump have made themselves secondary players in whatever drama now lies ahead.

Israel, and especially its Prime Minister Benjamin Netanyahu, have been primary players in this drama right from the start but are now feeling the failure of the war especially strongly. For the past half-century – ever since 1979 brought a peace deal with Egypt, previously Israel’s most dangerous enemy, but also brought Ayatollah Ruhollah Khomenei and his Islamic regime to power in Tehran – the biggest threat to Israel’s security and even survival has always been Iran.

This war, from the bombing of nuclear facilities in Iran one year ago to the broader bombing campaign that began on February 28, has been promoted by Netanyahu as being vital to overthrowing Iran’s theocratic regime and to eliminating the regime’s chances of acquiring a nuclear weapon. Meanwhile, Israel wanted to further reduce the threat posed by the two most powerful militias trained and supplied by Iran, Hamas in Gaza and Hezbollah in Lebanon.

But now, two and a half years since Hamas’s deadly atrocities in Israel in October 2023, both Hamas and Hezbollah remain intact and capable of killing Israeli citizens; the theocratic regime remains in power in Tehran; and Iran’s nuclear program, although it is severely damaged, is potentially repairable.

The memorandum signed last week states that Iran will not seek to acquire or develop nuclear weapons, but that is no different from what the Iranian regime has always said.

Israeli troops are sitting in southern Lebanon to prevent Hezbollah from launching attacks on Israel from there, but Trump is telling Netanyahu that he must stop attacking supposed Hezbollah targets in Beirut. If the memorandum is to be taken literally, Trump should also be telling Netanyahu to withdraw Israeli forces from Lebanon altogether.

Israel is not a direct signatory to the memorandum so it will feel even less bound by it than will Iran or the United States. If it wants to keep on fighting Hezbollah, it can and will do so. But it is nevertheless faced with a very difficult situation. Netanyahu’s longstanding strategy towards Iran has failed. He faces a general election in September or October which, on current polling, he is likely to lose.

Nonetheless, none of Netanyahu’s political opponents has yet come up with a new plan for how to deal with Iran. Whatever government is elected may well opt for a period of damage limitation. But that is not a long-term strategy. It does not resolve the situation in Gaza or the occupied West Bank. And it leaves unanswered the question of Israel’s future relationships both with the United States and with the Arab states of Saudi Arabia, the United Arab Emirates and the rest of the Gulf.

Moreover, if the peace does hold with Iran, Israel’s new government will now find it very hard not to accept and follow the terms of the 20-point plan for Gaza laid down by Trump last October, not least because it has support and potential finance from the Gulf Arab countries.

Even Hillary Clinton, the Democrat who Trump defeated in 2016 and who remains one of his most implacable opponents, wrote last week in the Financial Times that Israel, Europe and everyone else should adopt the Gaza plan because it is the only plan that is available. Where it leaves the question of the creation of a viable Palestinian state remains, however, a mystery.

Iran, too, would be well advised to keep its head down and to spend the next months or even years rebuilding its cities and its economy. The regime has proved that it is able to resist powerful external attacks and to remain in brutal control of its domestic population.

Iran has no immediate need to be provocative externally but a clear need to make its 92-million population less discontented. That means that its likeliest priorities will be to exploit the peace deal’s permission to resume exports of oil and other products, to secure the return of frozen Iranian assets overseas and to encourage Trump to carry out his promises to relax other economic and financial sanctions – all in order to raise funds to improve economic conditions.

One important and still open question is whether Iran will seek to impose tolls on ships passing through the Strait of Hormuz. The memorandum states only that there will be no fees charged for the next 60 days and leaves it to Iran and Oman, the countries on either side of the strait, to work out how to proceed after then.

It may be tempting to humiliate Trump by charging high fees, but it would be quite short-sighted for Iran to do so as that would simply encourage the Gulf Arab countries to invest in other routes for their products, including pipelines, railways and roads.

In the longer term, the biggest question is whether Iran will seek to reactivate its nuclear-weapons program. The United States in the negotiations following the memorandum seek to discourage such a resumption, both through the positive incentives of sanctions relief and through threats of renewed attacks.

Yet the belief that Iran would never have been attacked in the first place if like North Korea it had already had a nuclear weapon will remain a powerful incentive to resume the nuclear program covertly, and a powerful reason for outsiders, especially Israelis, to remain suspicious.

In the end, much may depend on how the reintegration of Iran into the world economy proceeds if, indeed, sanctions really are lifted. The memorandum talks about a supposed US$300 billion fund to rebuild Iran, though this looks more aspirational than a practical reality. But a more open Iranian economy would nonetheless be quite attractive to international investors, for there is ample scope to exploit its natural resources and modernize many of its industries.

It is a fair bet that if such a reconstruction and development process takes place, it will be led by Chinese companies, for they have the skills and the capital as well as being less at risk of future retributions than American ones, for instance.

The connections between Iran and indeed the whole of the Middle East with China are now likely to get even stronger, which also means that China will be the main superpower keeping an eye on Iran’s nuclear program. The region can never entirely stop looking westward, but from now on it will now look eastward. more and more every year.

This article was originally published in Italian translation by La Stampa. Republished with permission, it can also be found on Bill Emmott’s Global View.