Driven by regional upheaval, a deal to end conflict between Hamas and Fatah is being celebrated by Palestinians but could put at risk Western aid and set off a new phase of confrontation with Israel. Palestinians believe the surprise unity deal unveiled on Wednesday will strengthen their hand as they seek international backing for independence, presenting a united front and ending a divide that has set back their quest for statehood. But the Western states whose support is vital to the Palestinians' political campaign for recognition and which also prop up their public finances are waiting to see what kind of government will emerge from a deal that has alarmed Israel.

The details remain foggy. The information so far unveiled included a new government made up of independents that will aim to rebuild the Gaza Strip, tapping foreign aid pledged for that purpose but yet to be disbursed, and elections within a year.

Some Palestinians see a difficult course ahead for the government that will reunite the West Bank and the Gaza Strip under a single administration for the first time since 2007, when Hamas seized control of Gaza from President Mahmoud Abbas.

The new cabinet must convince Western states it is committed to peace, while also securing the approval of Hamas, which is hostile to Israel and opposes peace negotiations that Abbas has pursued with the aim of winning Palestinian independence.

A Hamas-led government that took office in 2006 faced a Western boycott, plunging the PA into financial crisis because of the group's refusal to recognise Israel and renounce violence -- terms to which Hamas still refuses to yield.

Another financial risk comes from Israel: Foreign Minister Avigdor Lieberman has already mooted the idea of withholding Palestinian tax revenues that Israel transfers to the Palestinian Authority if it shares power with Hamas.

Some Palestinian observers say it will be easy to get around the concerns of the Western states and Israel because there will be no Hamas members in the new cabinet. Others are less sure.

"Hamas must sign off on the government's programme, so it could be difficult," said Hany al-Masri, a Palestinian political commentator who helped mediate the deal brought about by seismic shifts in the Arab world.

"FROM DESPAIR TO HOPE"

Historic uprisings against autocrats in Egypt and Syria, regional rivals, are seen as vital to bringing about the breakthrough, setting this attempt at Palestinian reconciliation at odds with others that have failed in the past few years.

Palestinians say former Egyptian President Hosni Mubarak's suspicion of Hamas was central to the uncompromising position towards reconciliation adopted by Abbas, his ally. Now Mubarak has gone, Abbas has softened his position.

Hamas also appears motivated by regional turmoil.

Syrian President Bashar al-Assad, who together with Iran is one of the group's main sponsors, faces unprecedented protests similar to those which swept Mubarak from office in February.

"Hamas believes the best solution is to return to national unity," said Samih Shabib, a Palestinian political commentator.

The bleak outlook for the peace process also encouraged Hamas to sign the deal, brokered by Egypt's new military-led administration with which the group is seeking to curry favour.

The last round of U.S.-backed diplomacy broke down in September. Abbas, who built his career around the idea of a negotiated settlement with Israel, has publicly expressed his disenchantment with Washington's approach to negotiations.

Hamas shuns the U.S.-backed peace process as a waste of time designed to further Israel's interests and has instead looked to military confrontation, repeatedly firing missiles at Israel, triggering endless rounds of bloody retaliation.

There was no indication Hamas was ready to hang up its arms. However, the group's decision to sign up to reconciliation signals a will to play a role in other forms of international diplomacy aimed at furthering the Palestinians' cause.

These include a plan to seek recognition of Palestinian statehood at the U.N. General Assembly in September -- an idea opposed by the United States and Israel.

"Hamas wants to be in the political process," said George Giacaman, another Palestinian political scientist.

"It has decided to join the effort of the Palestinian Authority for state recognition and to be in the project rather than outside the project."

United, the Palestinians would be better able to press their cause in international bodies and to mobilise behind other forms of activism such as boycotts against Israel, said Masri.

"This might create confrontation with Israel: political confrontation ... but not a military one," he said. "There is hope. It isn't easy, but we've moved from despair to hope.