Hamas, the militant political movement that has ruled Gaza since 2007, has emerged from the latest round of fighting with Israel with its regional status significantly enhanced. At the same time, the movement faces new questions about its ability to take advantage of the diplomatic opportunities that it has gained. Hamas’ forceful response to Israel’s military operation in Gaza in November, which included landing rockets near Tel Aviv and Jerusalem, demonstrated its commitment to its core value of steadfastness. Moreover, in the wake of the eight-day clash, Hamas’ long-exiled leader, Khaled Meshaal, who had never before dared to show himself openly to Israel, entered Gaza from Egypt. Parading triumphantly through the streets, he reinforced the idea – at home and abroad – that Hamas had been victorious.

Beyond Gaza, the rise of political Islam in the Arab Spring countries, particularly Egypt and Tunisia, has created a more Hamas-friendly neighborhood. Crucially, the negotiations in Cairo that produced a cease-fire with Israel involved direct, high-level diplomatic contact between Egypt and Hamas – a fundamental shift from former Egyptian President Hosni Mubarak’s avowedly anti-Hamas stance.

Visits to Gaza by the emir of Qatar and Turkey’s foreign minister, as well as by other regional leaders, have further buttressed Hamas’ new stature. Demonstrating support for Hamas now means building credibility at home, which creates an opportunity to elicit large donations from Arab and Muslim countries to finance Gaza’s reconstruction.

By contrast, Mahmoud Abbas, the president of the Palestinian Authority, who embraces peace negotiations with Israel and disavows armed struggle, is more isolated than ever, despite his success in upgrading Palestine’s status at the United Nations to that of “non-member observer state” days after the fighting in Gaza ended. Hamas initially reacted skeptically to the statehood bid, but supported it after the cease-fire, owing to its expectation that it will be able to exploit Palestine’s upgraded status.

Nonetheless, recent events, together with the PA’s dwindling resources, have diminished Abbas’ credibility among Palestinians, who increasingly view him as desperate. Israel’s announcement after the U.N. vote of new settlements around Jerusalem weakened his standing further. Indeed, Abbas’ time is running out. The only question is who will replace him.

Meanwhile, Hamas is seeking to capitalize on its growing popularity by winning elections. In last October’s municipal elections in the West Bank – the first in six years – the largely secular Fatah party technically retained its authority; but voter turnout of only 55 percent, following Hamas’ call for a boycott, reflected waning support for the party. Hamas is now widely seen as the true representative of Palestinian national ambitions, and is set to unite the Palestinians under its flag.

But can Hamas find a basis for talks with Israel? To be sure, Hamas has not abandoned its resistance mantra; even so, it has moderated its stance on the Palestinian-Israeli conflict over time. Indeed, Hamas’ leaders have expressed support for the establishment of a Palestinian state based on the 1967 borders, with East Jerusalem as its capital.

This gradual shift, combined with Hamas’ endorsement of Abbas’ diplomatic approach in the U.N., suggests that Hamas now believes that a military victory over Israel is not possible. Palestinian and Israeli leaders will have to reconcile their differences and reach a diplomatic settlement.

Signs of Hamas’ shifting perspective are becoming increasingly apparent. While Meshaal maintained a hard-line stance in his speech in Gaza, in private discussions he expressed a readiness to accept a Palestinian state based on the 1967 borders. Meshaal even stated that, if Israel reconsidered its attitude toward the Arab Peace Initiative of 2002 – which calls upon the Arab world to recognize Israel’s right to exist in exchange for Israel’s return to its 1967 borders – Hamas would do the same.

But although Meshaal welcomed the idea of future negotiations with Israel, he maintained that the time is not yet right. Hamas is convinced that Israel understands only the language of force and power, and it will not negotiate until Israel accepts the permanence of Palestinian demands.

Israel may be starting to get the message. In fact, the recent fighting drove some Israelis, such as Giora Eiland, former Prime Minister Ariel Sharon’s national security adviser, to acknowledge that Hamas is a political reality that can no longer be ignored. Eiland even advised Israel’s government to recognize Hamas’s rule in Gaza, lift the siege, and negotiate a prolonged cease-fire directly with the movement. But the success of such an approach depends on Israel’s readiness to engage Hamas, which it continues to regard as a terrorist group, and on the viability of Egyptian mediation.

Here, Israel may come under growing pressure from its principal ally. Indeed, America’s acceptance of Islamist parties in the region, from Ennahda in Tunisia to the Muslim Brotherhood in Egypt, suggests that skepticism of Islamist groups may be losing ground. It also raises doubts about whether the U.S. will maintain its strict policy of isolating Hamas.

Egyptian President Mohammad Mursi’s success in mediating between Israel and Hamas demonstrated that Islamists can be flexible – even when it comes to Israel. There is room for moderation in the position of both sides, but their leaders must be given the right platform on which to make the needed adjustments.