The Military Intelligence (MI) of Israel Defense Forces assesses that dramatic strategic changes in the Middle East will unfold in late 2011, Israeli daily Yediot Aharonot reported Thursday.

In the wake of mass demonstrations in Egypt against President Hosni Mubarak's regime in recent weeks, MI's analysts predict a weakening of the security cooperation between Israel and the Palestinian National Authority, alongside a hardening of Palestinian demands for renewing the stalled peace process.

Despite the Palestinians' invigorated efforts to promote initiatives in the United Nations that Israel opposes, MI holds that the PNA will not unilaterally declare statehood in September, but rather will persist in its endeavor to convince UN member states to announce their recognition of an independent Palestinian entity.

Some leading military and defense commentators lambasted in recent weeks the failure of Israeli intelligence to foresee the social unrest that swept Egypt.

"There are currently no doubts about the stability of the regime in Egypt ... the Muslim Brotherhood is not organized enough to take over," said the new MI chief Major-General Aviv Kochavi in his debut appearance before the Israeli Parliament's Foreign Affairs and Defense Committee on the day the mass demonstrations broke out.

Though Israeli intelligence failed to predict the intensity of the Egyptian revolt, MI did posit 2011 as a year of potential regime change accompanied by many unknowns.

MI now estimates that the Sinai Peninsula may pose new security challenges for Israel if the Bedouin tribes who inhabit the area expand their armed clashes with Egyptian security forces. Another fear is of an increased flow of arms into the Hamas-ruled Gaza Strip via tunnels that run under the border between Egypt and the enclave.

In regard to the recent election of a new parliament in Lebanon, the MI assessment maintains that Hezbollah could take over the country during the year.