THE CREATION OF ISRAEL COMPLETED CHANGED THE GEOPOLITICAL SITUATION OF THE MIDDLE EAST: The Arab states refused to accept or recognize Israel and imposed an economic boycott on it. Although this limited Israel’s economic potential, it also imposed limitations on the Arabs. Aside from the loss of well-established markets for their produce and labour, Syria and Jordan could no longer use the oil refinery and port of Haifa, and the Iraq Petroleum Co.’s oil pipeline across the desert from Baghdad had to be rerouted. Jordan had no access to the sea except through the port of Aqaba, to which there was no paved road. Land communication between Egypt and the Arab states east of the Jordan became impossible. To avoid overflying Israel, air routes had to be changed, often at considerable expense, and the transit trade through Haifa, which had been important to Jordan and Palestine, shifted to Beirut. These obstacles were overcome in time, but it required wrenching adjustments in trade patterns and the severe loss of income to towns like Jerusalem, which had benefited from the flow of goods and tourists between the Mediterranean and the Arab hinterland to the East. Ironically, Israel, forced by the boycott to leapfrog over its neighbours to find markets, became a major exporter of technology throughout the world and in 1998 had a per capita income and physical quality of life far superior to other nations in the region.
The Palestine problem also became an overriding issue in Arab politics and a source of much tension and instability. In both Syria and Egypt, and eventually in Iraq, the incompetence of the old regime in the 1948 war was a major justification for seizure of power by the military, and Jordan’s King Abdullah was assassinated in 1951 because he had dealt directly with the Israelis on a division of the spoils in Palestine.
A desire to avenge the 1948 defeat and fears of Israeli expansionism became an obsession with the Arabs. Enormous amounts of money that could have gone to social and economic programs were spent on armaments and military preparations. Israel responded in kind, and the "Near East" (the Arab states and Israel plus Iran) became the less-developed world’s largest importer of weapons. Three major Arab-Israeli wars causing tens of thousands of casualties were fought--in 1956, 1967, and 1973--before any movement toward a meaningful peace began.