It seems not to have dawned on the Palestinians that for them the Gulf crisis is a disaster. In cheering on Saddam Hussein's swallowing of Kuwait, they debased their moral objection to the Israeli occupation, torpedoed the accommodators in Israel and strengthened the no-compromisers, alienated the Arab establishment and indefinitely put off any return to an active mediator's role by an American president, George Bush, who had begun his term scrappily trying to locate "reasonable middle ground." Meanwhile, the PLO was losing or loosening its connections to both great powers.

Ignoring these powerful political facts, the Palestinians appear to be reposing their faith in a Saddam Hussein double coup: 1) to huff and puff and blow Israel down or 2) to exchange Iraqi withdrawal for the calling of an international conference that will finally deliver statehood. Scenario No. 1 can be dismissed. Scenario No. 2 neglects the cited political facts.

The PLO and its chairman, Yasser Arafat, still "represent" the Palestinians and somehow must be dealt with. Palestinians seem to think this means that a conference will, without Israel's participation or consent, somehow create for them a state on the strength of the broad general support that exists for their national cause.

But all the talk of whether or how an Iraqi settlement could be linked to such a conference ignores political reality. By its espousal of aggression the PLO has marginalized itself for some period of time, until it discovers how to be renewed. It matters, but not much, that it made its radical turn at least partly in frustration over Israel's hard-line West Bank tactics, military and diplomatic.

In Israel, the argument has always been less between advocates of one possible path to peace and advocates of another than between those who think that for large strategic and national considerations a chancy peace is necessary and those who believe it is folly and prefer retaining the territory. For Israelis this soon becomes less a political question than a metaphysical one, a matter of good vs. evil.

Even before Aug. 2, Yitzhak Shamir's ruling Likud was able to beat out its former coalition partner, the more liberal Labor, by connecting up with Israelis who were apprehensive about the sort of peace being concocted by an American administration then engaged in dialogue with the PLO. Shamir's position has if anything been strengthened since his election by suspension of that U.S.-PLO dialogue and by Saddam Hussein's attack on Kuwait. Israelis who believe accommodation with Palestinians is essential for reasons of both security and democracy are even more on the defensive. Shamir appears even more his people's choice.

In Washington last year, Shamir and Bush had a brief, tense meeting which anticipated the collapse soon afterward of the then-current Shamir peace plan -- a collapse brought on by Bush's efforts, over Shamir's objections, to draw representative Palestinians into talks and get the plan off the ground. It is a fair question whether Saddam could have exploited the Israeli-Palestinian question to the extent he has in the Gulf crisis if Shamir had used wisely that moment in which the PLO was playing a relatively forthcoming backstage part in moving toward those talks.

In Washington this week, Shamir relaunched the same plan. This time he found a nice fit between his reendorsement of negotiating terms that he had drafted with the intent to fence out the PLO, and a Gulf-centered Bush's reluctance to take any Israeli-Palestinian step that might even faintly suggest the reward of Saddam Hussein's aggression.

The crisis is a disaster for Palestinians. It greatly burdens their quest for a homeland precisely at a moment when a negotiating breakthrough was still conceivable. They don't yet understand what hit them.

The crisis is another kind of disaster for Israelis. They face a military threat from Iraq, and they are farther from conciliation with the party with which conciliation is their most vital national interest. It's worse that many Israelis see prospective conciliation as a snare. For them the status quo will do nicely, even if it involves denial of the rights of others.

There is an unhappy mismatch here in both substance and perception. Its likely effect will be to prolong the stress on the ground, restrict serious diplomacy to damage limitation and punish Israelis and Palestinians -- both of them offended, both of them offending.