The current surge in Arab terrorist attacks both here and abroad coincides with the decline of the Palestine Liberation Organization as an effective military force but is also traceable to a myriad of other developments in the last year that have had profound effects on the Palestinian community, according to Israeli intelligence sources and terrorism experts.

The escalation of violence, in which 16 Israelis have died in the past 12 months -- double the annual average since 1980 -- has become a fearful preoccupation with many Israelis of varied ideological persuasions and a source of growing concern for the country's security services.

With the Palestinian nationalist movement fragmented more than ever and with young Arabs in the occupied West Bank and Gaza Strip increasingly mounting attacks on their own initiative -- apparently without direction from any central command -- the security forces find themselves confronted by a new and much more amorphous terrorist threat than ever before.

Senior commanders in the Israeli Army concede privately that their task in preventing terrorism is growing more formidable than it was a year ago, and that Palestinian attacks against civilians in both Israel and the occupied territories and sensational "showpiece" attacks abroad are likely to continue to escalate.

While the spectacular terrorist operations like the hijacking of the Italian cruise ship Achille Lauro on Monday and the Trans World Airlines hostage crisis in Beirut in June command the biggest newspaper headlines, Israel has been shaken more by a rise in hit-and-run murders of civilians and soldiers in Israel and the occupied territories that security sources say for the most part are not linked to the PLO or its splinter factions.

They include random stabbings and shootings of soldiers and civilians in densely populated Arab towns in the West Bank and Gaza Strip, the slaying of hikers in remote areas on both sides of the border between Israel and the West Bank, attacks on public buses and the planting of bombs near hitch-hiking stations on highways.

Most of the attacks date to the start of the joint Jordanian-PLO peace initiative begun earlier this year, and government analysts of the terrorism trend say that it may involve more than coincidence, noting that, during the Camp David peace initiative, there were a near record 56 Israeli civilians killed in Israel and the occupied territories in 1978 and 21 in 1979.

Since then, the highest toll had been in 1981, when 11 Israelis were killed.

A paradox of the Israeli invasion and three-year occupation in Lebanon is that by crushing the PLO's military capability and dispersing its fighters to Tunisia and Algeria, Israel may have unwittingly contributed to the rise of home-grown Arab terrorism. In 1982, the year the invasion of Lebanon was launched, only three Israeli civilians died in terrorist attacks in Israel and the occupied territories.

Meir Amit, former head of the Mossad external intelligence service, said, "The war in Lebanon had contradictory influences. On the one hand it weakened at least the military arm of the PLO, but on the other hand it strengthened the political side. It didn't extinguish the fire of nationalism. It increased it."

Israeli security officials say that the defeat of the PLO and its subsequent fragmentation created an attitude among many young, fervently nationalistic West Bank and Gaza Palestinians that they would no longer rely on outside forces to lead the resistance to Israeli occupation and would have to take the initiative themselves.

Coupled with that change in attitude, Israeli analysts of terrorism trends say, was an emboldening impact on young Palestinians resulting from their perception of the success of Lebanese Shiite Moslem militiamen in helping to drive the Israeli Army out of Lebanon.

Another, indirect, effect of the war on terrorism, security sources said, was a dilution of the effectiveness of Israel's domestic intelligence organization, the Shin Beth, in the occupied territories because so many agents were redeployed to Lebanon and many are still posted in southern Lebanon.

The security forces have traditionally relied heavily on the Shin Beth, through its informers, to monitor extremist movements in the occupied territories, and a weakening of intelligence-gathering there is believed to have contributed significantly to the surge in violence. Moreover, military sources said, the spontaneous, individual character of most of the recent attacks makes it difficult for intelligence agents to anticipate where terrorists will strike next.

Israel's release of 1,150 Arab prisoners in May in exchange for three Israeli soldiers captured in Lebanon also appears to have had a psychological impact on militant Palestinian youths, the experts say.

Included in the group were 600 Palestinians who were freed to the occupied territories, some of whom were involved in the most notorious terrorist murders in Israel's history.

While the released prisoners are under such close surveillance that it is unlikely they would be able to engage in terrorism, their release nonetheless boosted morale among potentially violent Palestinian nationalists and encouraged a belief that capture does not necessarily result in life imprisonment, terrorism experts here say.

"It was a big mistake. Not directly because they [the released prisoners] became a dangerous element and contributed to terrorist activity, but as a precedent for future blackmailing," Amit said. "But if you make a mistake, you don't have to repeat it."

Israeli military officials and some Cabinet ministers, including Defense Minister Yitzhak Rabin, have argued that the presence of the PLO's command structure in Jordan has been a factor in the increase of terrorism in the West Bank.

The officials say that in contrast to the remoteness of Tunis, PLO leaders in Amman can at the least inspire attacks against Israelis by meeting with the hundreds of Palestinians who daily cross the Allenby Bridge from the West Bank into Jordan.

Palestinians in the West Bank, particularly those born after the Israeli occupation began in 1967, have in the last several years shown increasing signs of frustration and impatience with what seems to be an interminable and ineffective process by the older generation both inside and outside the territory to liberate what they regard as their rightful homeland. More of them appear, judging from conversations with them, to be turning to radical solutions to determine their own fate and are openly resentful of the failure of the traditional liberation movement to accomplish that goal.