By Amos Harel and Avi Issacharoff

Yasser Arafat must be turning in his grave. Barely two and a half years have gone by since his death and already his movement, Fatah, is steadily losing its last strongholds in the Gaza Strip.

For the past few months, on an off, the Palestinians - and with them, foreign media outlets and Israel's intelligence community - have debated whether the situation in Gaza can be termed civil war. The sights of the past several days, including the hesitant rearguard action that Fatah is waging against Hamas, evidently removed any lingering doubts. A civil war is raging in the Gaza Strip - and the Islamists have the upper hand.

The outcome in the offing will have far-reaching implications not only for the future of the Palestinian Authority, but also for its relations with Israel, and perhaps for the entire region. The old Palestinian dream of a real state is fading fast. The speech that President George Bush is scheduled to deliver on June 24 (the fifth anniversary of his speech laying out a two-state vision for the Middle East) will have to undergo substantial revision.

Hamas's takeover of Gaza, which yesterday seemed closer than ever, is destined to split the territories into two entities that are politically and even culturally separate: Hamastan (the Gaza Strip) and Fatahstan (the West Bank).