Opinions are divided among Israelis and Palestinian groups over future relations with Egypt although all agree those relations will continue to be important.
The Muslim Brotherhood asserted that its candidate, Mohamed Morsi, won the run-off election to be Egypt's next president. Egypt's governing Supreme Council of the Armed Forces indicated it will accept the result but it has reduced the president's authority and given itself legislative powers while the elected parliament is dissolved.
The decree sets up a possible confrontation between two traditional sources of power, the barracks and the mosque.
An Israeli soldier secures an
area near the border between Israel and Egypt, June 18, 2012.
Israel has been watching with concern. Its leaders attach great importance to maintaining the peace treaty signed with Egypt 33 years ago. Despite cool relations, the treaty is the basis for cooperation between the two neighbors in many areas including security, commerce, transportation, energy and diplomacy.
Israel's Prime Minister Benjamin Netanyahu underscored this view recently.
He says he hopes any government that arises in Egypt, any president elected in Egypt, will choose to honor the peace agreement. He says the peace accord helped Egypt as much as it helped Israel, and he hopes that the next government will understand it is in Egypt's interest no less than Israel's.
The Muslim Brotherhood, which dominated Egypt's now-dissolved parliament, has said it will respect all previous treaties. But some of its members have suggested submitting the Israel treaty to a popular referendum where its future would be much less certain.
The second major Israeli concern is the increasing lawlessness along the border with Egypt's Sinai Peninsula. The upheaval in Egypt has led to a rise in smuggling, human trafficking and terrorist attacks across the border.
A Palestinian analyst in East Jerusalem, Mahdi Abdul Hadi, says Israel is closely following events in Egypt.
"The Israeli government is sitting in a bunker, watching, keeping an eye, trying to infiltrate here and there to get more information and putting [forth] different scenarios, not for today but for five years from now," said the analyst.
Hamas' reaction
The Muslim Brotherhood's assertion of election victory in Egypt brought celebrations in the Gaza Strip, which is controlled by the Islamist Hamas movement.
Hamas leader Ismail Radwan says relations with Egypt have improved since last year's popular uprising brought the Muslim Brothers into the power structure.
He says relations have improved a lot and he hopes what he calls "our big sister" will help break the Israeli blockade on Gaza.
That blockade, imposed five years ago following the Hamas takeover of Gaza, has seriously degraded living conditions in the territory.
The Egyptian government allows goods and construction materials to cross through hundreds of illegal tunnels. But it continues to restrict the movement of goods across the Rafah Crossing to Gaza.
Hamas hopes a new Egyptian government will open up the Rafah Crossing and allow more legal trade.
The rival Fatah Movement, which controls the West Bank and the Palestinian Authority, views the Egyptian election somewhat differently.
Fatah and Palestinian Authority President Mahmoud Abbas enjoyed good relations with Egypt's ousted president Hosni Mubarak, while the Mubarak government viewed Hamas with suspicion. Hamas refuses to recognize Israel and is labeled a terrorist group by Western governments.
A Fatah leader in Gaza, Diab Al-Louh, says he hopes Egypt's new leadership will encourage Hamas to moderate its policies, soften its stance on Israel and implement a reconciliation agreement with Fatah.
He says Fatah is committed to what was agreed upon and ready to implement it fully.
A Gaza leader of the Popular Front for the Liberation of Palestine, Kayed Ghoul, believes a government led by the Muslim Brotherhood will be pragmatic and focus first on reviving the Egyptian economy which has been battered by 17 months of political upheaval.
He says this reality will reflect on the political positions of the Muslim Brotherhood. They will likely keep the peace agreement with Israel, he says, and try to have Hamas align its positions more with the Brotherhood's.
A senior Hamas leader, Mahmoud Zahar, speaking on the West Bank radio station Rai-FM, said he believes the rise of the Islamists will create a more balanced Egyptian position toward the various Palestinian groups.
He says they will not be like Mubarak regime, pressuring Hamas, closing all the crossings and borders and just allowing Fatah members or the Israelis to pass.
Analyst Abdul Hadi says Egyptian politics is in turmoil. "We are entering a new chapter. Uncertainty lies ahead," said Hadi.
He says this uncertainty lies in many areas. How will political Islam relate to civil society? What role will Egypt's military play in defending the country and the constitution and balancing the various political groups? And finally, how will the various sectors of society address the growing problems of security and economic distress?
Analysts say it will take time for the turbulence to subside. But they note that Egypt values its relations with the various sides in Israel and the Palestinian territories. And as a result whatever leadership emerges in Cairo is likely to want to maintain links with all of them.
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