"THE ONLY moments for creative diplomacy in the Middle East come after wars," a Reagan administration official remarked several years ago, at a time when there was both peace and diplomatic paralysis. Perhaps this official feels more encouraged today.

Israel and the Palestinians have been fighting a kind of war during the last two months in the West Bank and Gaza. It doesn't look like a war, because only one side is carrying guns, but anyone who doubts that the rock-throwing Palestinians would kill Israeli soldiers if they could underestimates their resolve. What's intriguing is that this latest Arab-Israeli conflict -- like those of 1967, 1973 and 1982 -- has created space in which diplomats can operate. It has altered, at least momentarily, some of the political assumptions that underlie the status quo.

"We are back to basics," says Richard Viets, a former American ambassador to Jordan and former deputy chief of mission in Israel. Specifically, Viets argues, the recent Palestinian uprising has forced all sides to consider once again the concept of exchanging land for peace -- as outlined in United Nations Resolution 242 more than 20 years ago and elaborated since then in the 1978 Camp David accords and the 1982 Reagan peace plan.

Pessimism is always the wisest policy when dealing with the Middle East, so we shouldn't assume that the recent diplomatic rumblings will produce anything more tangible than a new round of seminars and study groups at the Brookings Institution and the Council on Foreign Relations. Still, it's fun to speculate about what might happen if any of the parties decided to get serious about resolving this miserable conflict.

The sensible way to begin a process of negotiation now, as after any war, would be to adopt the approach Henry Kissinger used in 1973. Recognizing that the underlying issues in the Arab-Israeli conflict were too difficult to tackle at the outset, Kissinger began with a limited "disengagement" agreement -- a modest, interim measure designed to separate the combatants and get them talking, rather than fighting.

Would a similar approach work now? Probably not, since it treats Israel and the Palestinians as equal combatants, which they quite clearly are not. Still, there are some interesting straws in the wind. According to several American officials, Israeli Prime Minister Yitzhak Shamir sent a private letter to President Reagan last week in which he said, among other things, that he wasn't opposed to negotiations about exchanging land for peace. Meanwhile, the PLO's Yasser Arafat endorsed a visit to Washington last week by two Palestinian leaders who carried a list of "14 Demands" that looked suspiciously like a PLO proposal for an interim disengagement agreement. The list included such practical proposals as "removal of all restrictions on building permits and licenses for industrial projects and artesian wells" -- a far cry from the usual PLO rhetoric about the inalienable rights of the Palestinian people.

The point isn't that the Palestinians' 14 demands will be accepted by Israel. Some of them are probably non-starters. What matters, for now, is the simple fact that both sides may be willing to talk about interim, transitional measures for the West Bank and Gaza, without demanding assurances about the final status of the territories. (All this talk of interim measures and transitional arrangements is intriguing partly because it's reminiscent of the language of the Camp David accords, which called for a transitional period of "autonomy" in the West Bank and Gaza and left fuzzy the ultimate status of the territories.)

Whether any good comes from this latest Arab-Israeli conflict depends on what lessons it teaches Israelis, Palestinians and Americans. It may simply drive all sides deeper into their bunkers and reinforce the prevailing orthodoxies. But it's just possible that the events of the last two months will lead all sides to question whether it really makes sense to maintain the status quo. Consider the pressures at work on the various players:

The Israelis. Denounced abroad for shooting and beating Palestinian protestors, the Israelis have discovered anew that it's no fun playing the role of an occupation army. It's a nasty, unpopular, brutalizing job. The only way to rule a population that doesn't want to be occupied, as the Israelis have learned over the years, is to break the spirit of revolt -- to convince the mobs of rock-throwing youths that their cause is utterly hopeless, and to threaten those who persist with the most severe punishment.

Iron-fist tactics worked once before in Gaza, during the early 1970s. The area had been a hotbed of terrorism until an Israeli officer named Ariel Sharon was called in to impose order. "The fierceness of these patrols had terrified the residents of Gaza to the point where they became reluctant to either participate in further terrorist activity or to provide active support for those who did," writes Sharon's biographer, Uzi Benziman. The iron fist subdued Gaza -- until two months ago.

If Israel intends to maintain its military occupation, it will now have to break the spirit of a new generation of Palestinians. That won't be an attractive process to watch, but it's an inescapable -- indeed, essential -- requirement for Israel if it opts for the status quo.

The sad truth is that all the Israeli options have drawbacks: Israel can continue to impose its occupation on an unhappy Arab population, and take the heat at home and abroad; it can try to expel the Arab population of the territories, as Rabbi Meir Kahane has urged, drawing further international criticism; or it can turn administration of the West Bank and Gaza over to Jordan or to the Palestinians themselves. The question for Israel is which alternative is least bad.

The Palestinians. The Palestinians have learned a lesson in politics. Power doesn't grow out of the barrel of a gun, as the posturing PLO fighters in Beirut used to imagine, and it certainly doesn't come from Yasser Arafat's jetting around the world pretending that he is a head of state. It comes instead from the willingness of seemingly powerless Palestinian youths, armed only with rocks, to face Israeli guns. And it comes from those actually living inside the West Bank and Gaza, rather than the exile groups outside.

This PLO power shift, from outside the territories to inside, could encourage a more realistic negotiating stance. Hannah Siniora and Fayez Abu Rahme, the two Palestinians who met with Secretary of State George Shultz last week, talked the language of moderation. They presented their list of 14 demands, talked about interim measures, and proclaimed, in Siniora's words: "We are willing to talk to any party that is willing to negotiate." Since Arafat himself chatted with the two Palestinians by telephone while they were here, the PLO leader apparently has blessed, for the first time, a proposal to negotiate interim measures to improve conditions in the West Bank and Gaza.

The Americans. For the Reagan administration, the lesson of the last two months may be that it's time to shelve the Jordanian option for settling the Palestinian problem (the approach that was at the heart of Reagan's 1982 peace plan) and return to the concept of Palestinian autonomy and self-determination that was embodied in the Camp David accords.

The simple fact is that the Palestinians in the West Bank and Gaza don't want to be ruled by a Hashemite king in Amman; they want to determine their own future. "Jordan is not going to be the spokesman of the Palestinians," said Siniora last week. King Hussein, likewise, is clearly sick of the thankless task of playing middleman, as he made clear in his angry interview last week with The Post's Jonathan Randal. "It's time for all of us to reassess," said the king. Just so. It's late in the day for the Reagan administration to get involved, but if they do, they should focus this time on the Palestinians themselves -- and not on the Jordanian fig leaf.

That leaves the United States -- and the Israelis and Palestinians -- with the same intractable problems they faced in 1978, during the negotiation of the Camp David accords. It would be nice if this time, they got it right. But don't bet on it. In the Middle East, alas, realism and pessimism are the same thing.

David Ignatius, an associate editor of The Washington Post, edits the Outlook section.