By Jonathan Marcus
BBC diplomatic correspondent
Amidst the barrage of bad news from Iraq, the growing chaos in Gaza, instability in Lebanon and uncertainty in Israel, one thing emerges clearly.
Presidents Talabani (l) and Ahmadinejad (r) met last year
The US invasion of Iraq and its quest to spread democracy throughout the region has had a series of profound but unintended consequences. Of these, the most important is the rise of Iran.
Washington's destruction of the Taleban regime in Afghanistan and its toppling of Saddam Hussein in Iraq served to destroy Tehran's main strategic competitors.
For a brief moment Iran too feared US intervention. It was at this moment that Tehran appeared most willing to explore talks.
But the Americans' increasing problems in Iraq showed that for the Iranians the cloud of US ascendancy did indeed have a silver-lining.
Iran now was free to step-up its influence throughout the region - in Iraq, in Lebanon and in the Palestinian territories.
Sunni governments - like the Egyptians, the Saudis and the Jordanians - watched with horror as their fears of a new Shia ascendancy appeared to be coming true.
Such fears have prompted the beginnings of a re-alignment.
"Something is happening that could have a strategic potential," says Dennis Ross, the US peace envoy to the Middle East during the Clinton years.
Ambassador Ross dates the genesis of this to Saudi Arabia's criticism of Hezbollah during last summer's Lebanon war.
"Iran," he said, was perceived by many Arab states "as trying to seize control of the Israel-Palestine issue and was using Hezbollah and Hamas as tools".
This the Saudis and the other Sunni states saw as a threat because, as Ambassador Ross put it, "if the Iranians were in a position in which they could control the most evocative symbols in the region they could use it against these regimes".
Add in the widespread unease at Iran's nuclear activities and you have a potential new alignment where the moderate Arab states and Israel all share common interests.
The Saudis have dusted-off their Middle East peace plan, and Riyadh, Cairo and Amman are all clamouring for a greater US push on the Palestinian front.
US troops in Iraq face attacks almost on a daily basis
And if this is the price for a new alliance to contain Iran, then the Bush administration seems willing to at least go through the motions.
But given the bitter internecine rivalry between the Palestinian factions, can there really be any great hope of progress?
Israel's Prime Minister Ehud Olmert is seriously weakened too - battered by his poor showing in last summer's Lebanon war and a series of scandals that have afflicted the Israeli political system.
So for all the talk of a new US diplomatic push, Dennis Ross says that it is going to be very hard to make a strategic breakthrough now.
He put it to me this way: "Can weak leaders take on existential questions?"
So here, too, the Americans are going to have their work cut out.
But there is also a much more fundamental problem for the Americans.
The invasion of Iraq has paradoxically also served to bring an end to the era of US diplomatic primacy in the Middle East, says Richard Haass, president of the Council on Foreign Relations and a former State Department official.
"For much of the last two decades the US enjoyed an ahistoric advantage in the region, with the end of the Cold War and the domination that it showed in the region after Iraq invaded Kuwait," Mr Haass says.
"Now though, we are seeing something fundamentally different." It was, he says, the end of American primacy.
However, Mr Haass is quick to stress that this was not an end to American influence. The era of US domination is over, but it is not being replaced by any single country.
"Essentially, we are looking at a messier, a much more complicated, a much more troubled Middle East, where the capacity of the US to shape affairs is much-reduced," Mr Haass says.