Hamas is casting a long shadow over Israeli-Palestinian peace talks.

Although weakened by harsh economic sanctions and feeling more isolated after last week's Mideast peace conference in the U.S., the Islamic militants retain a tight hold on Gaza and have the power to disrupt future negotiations with increasingly deadly rocket attacks on Israel.

The Israeli, Palestinian and U.S. leaders haven't let on whether they'll confront, co-opt or try to ignore Hamas, while deepening divisions between ideologues and pragmatists make the group more unpredictable.

For now, the hard-liners who led the violent takeover of Gaza in June are still in charge, blocking any move toward compromise.

In an interview, their spokesman, Sami Abu Zuhri, dismissed the Mideast conference at Annapolis, Md., which relaunched peace talks after seven years of bloody deadlock, as a meaningless ceremony.

He shrugged off the participation of more than a dozen Arab states, including Hamas' main Arab ally, Syria, as a sign of Arab weakness under U.S. pressure. Hamas is more pivotal than ever, he insisted.

"Simply, no party can dictate its program on the region without Hamas," he said.

But another senior Hamas official, representing the pragmatic wing, said the group was caught off guard by the heavy Arab turnout at Annapolis and feels increasingly sidelined. He spoke on condition of anonymity because his views contradict the official line.

Hamas is already being shunned by much of the world because of its violent ideology, rejection of peace talks and call for the destruction of Israel. It has had trouble providing even basic services, mainly because of the near complete closure of Gaza's borders by Israel and Egypt. One Arab diplomat said he expects Hamas to run out of money by the summer.

For now, though, Hamas' rule over Gaza's 1.5 million people appears unshaken.

Hamas has disarmed its rivals in the Fatah movement of Palestinian President Mahmoud Abbas and silenced most dissent. After a Fatah protest rally of a quarter of a million people in mid-November, Hamas arrested hundreds and threatened others with retribution if they demonstrate again.

Many have heeded the warning, including 34-year-old Alaa, a member of Abbas' once powerful Preventive Security Service. Alaa, who would not give his last name, said his Hamas jailers shaved his head after the Fatah rally. He pointed to his mark of humiliation — a light fuzz just beginning to grow back — and said he won't criticize Hamas in public anymore.

With Hamas showing no signs of fading quietly, the U.S. has tried to isolate the group as it brokers a peace deal. Once a Palestinian state is achieved, "the Palestinians in Gaza are going to have to make a choice" whether to join, Stephen Hadley, President Bush's national security adviser, said recently, explaining the phased approach.

Meanwhile, the international community is trying to boost Abbas in the West Bank. Donor countries are expected to approve large sums of aid for the Palestinian president to distribute, while Gazans face a further slide into poverty.

"What the Americans will strive for in this situation is real improvement in the West Bank and real deterioration in Gaza," said Mouin Rabbani of the International Crisis Group, an independent think tank.

However, it may be impossible to ignore Hamas until the Palestinians have set up their state.

At the Annapolis conference, Israel and the Palestinians renewed a promise to carry out a series of steps outlined in the "road map" plan, parallel to the negotiations. In the first phase, Israel must stop expanding West Bank settlements and the Palestinians must dismantle militant groups.

Abbas' security forces made progress in the West Bank, but say that can't take on Hamas in Gaza. Israeli Prime Minister Ehud Olmert says Gaza has to be part of the equation if Israel is to be expected to meet its obligations.

That demand could torpedo the entire process, since Abbas has no say in Gaza. "If Israel takes this point of view, then phase one (of the road map) is going nowhere," said Israeli analyst Yossi Alpher.

Much will depend on the retired American general appointed to judge road map compliance, former NATO commander James L. Jones. But it's not clear what his marching orders are.

Senior members of Abbas' Fatah movement say it would be a mistake to use force against Hamas.

Hamas' public support is steadily eroding, said Kadoura Fares, a Fatah official. A weakened Hamas will eventually be forced to abandon its hardline ideology or be brought down in a popular uprising, said Fares.

But for either scenario to work, he said, Israel must demonstrate that moderation pays — releasing Palestinian prisoners, for instance, or lifting roadblocks.

"We believe that ... every step forward in the peace process will only increase the pressure on Hamas," Fares said.

Israel faces its own dilemmas.

It could try to crush Hamas and reoccupy Gaza in response to ongoing rocket fire. However, previous offensives were ineffective, an invasion would likely claim many casualties and Abbas' public support would be wiped out if he re-emerged as a political power in Gaza with the help of Israeli tanks.

Yet Israel fears that the longer Hamas is left alone, the more opportunity it will have to turn its fighters into a quasi-army, on par with Hezbollah guerrillas in Lebanon who fought Israel to a draw in a 2006 war.

Hamas has been boasting about its military prowess.

A day before the Annapolis conference, Ahmed Yousef, a senior Hamas official, said that his group was able to put more lethal warheads on its rockets "to create sufficient terror and fear."

Another Hamas leader, speaking on condition of anonymity because he was not authorized to speak about the group's weapons development, said at the time that Hamas has extended the range of its rockets, to reach the Israeli city of Ashkelon, north of Gaza, and not just the small border villages targeted so far.

Abu Zuhri said Hamas could take on Israeli troops, and while perhaps not defeat them, extract a heavy price in casualties. "We are ready for a confrontation," said Abu Zuhri.

However, the Hamas official from the pragmatic wing said Israel could likely inflict serious damage on the group.

Also weighing on Hamas is the possibility of being abandoned by Syria, its main patron along with Iran — although that's still a long way off.

Syria would have an incentive to distance itself from Hamas if Syrian-Israeli peace talks were to resume. But cutting ties with Hamas and other militants would mean giving up leverage against Israel, and Syria appears in no rush to do that.