The Bill Clinton administration's commitment to the peace process gave birth to the Dual Containment policy in 1994, which was "designed to reassure Israel that the U.S. would keep Iran in check while Jerusalem embarked on the risky process of peacemaking," according to Kenneth Pollack, who served as an Iran analyst with the CIA at the time.

In the words of Martin Indyk, assistant secretary of state under Clinton, Israeli-Palestinian peacemaking and the isolation of Iran were symbiotic. "The more we succeeded in making peace, the more isolated [the Iranians] would become. The more we succeeded in containing them, the more possible it would be to make peace," Indyk said.

Consequently, Israeli and U.S. rhetoric on Iran climaxed during this period. While Israeli Prime Minister Yitzhak Rabin accused Iran of "fanning all the flames in the Middle East," U.S. Secretary of State Warren Christopher told reporters in March 1995 that "Wherever you look, you find the evil hand of Iran in this region." Iran's own actions did little to cast much doubt on these accusations.

Similarly, former British Prime Minister Tony Blair blasted Tehran in December 2006 as he toured the region and sought to shore up Arab support against Iran. Much like Rabin and Christopher before him, Blair wanted to form an "arc of moderation" consisting of Israel and pro-Western Arab dictatorships to isolate Iran.

Yet after a decade of making Iran's isolation a central tenet of Washington's Mideast policy, the track record is clear: In spite of all the rhetoric and all the political capital invested in this approach, the policy of containing Iran has failed miserably. Though a significant cost has been imposed on Iran, the isolation policy has neither prevented Iran's rise nor has it compelled Tehran to moderate its foreign policy.

As President Bush tours the region, he will seek to give the impression that the U.S. is not deserting this policy and that increased support from regional actors can succeed in containing Iran. Yet his message will likely be met with great scepticism. Now, more than ever before, Washington seems to have little choice but make a shift on Iran.

First, Iran has continued its nuclear programme in spite of both U.N. sanctions and Washington's unilateral financial sanctions. The strategy of incrementally tightening the U.N. sanctions has been derailed by the December National Intelligence Estimate (NIE), which ascertained that Iran currently does not have a nuclear weapons programme.

Consequently, the much anticipated third U.N. resolution seems nowhere in sight. Russia and China have signaled greater resistance to it in response to the NIE and the Iranian U.N. ambassador has taken a month's vacation, reflecting Tehran's lack of worry. And in a great blow to the effort of forcing Iran to face a united Security Council, Russia has begun delivering nuclear fuel to Iran's Bushehr reactor after years of procrastination.

Second, U.S. commanders in Iraq have toned down accusations of Iranian meddling and indicated that Iran is pressuring its Shia allies to cease hostilities. Col. Steven Boylan, spokesperson for David Petraeus, told the Washington Times earlier in January that the U.S. is "ready to confirm the excellence of the senior Iranian leadership in the pledge to stop the funding, training, equipment and resourcing of the militia special groups."

The statement stood in stark contrast to earlier assessments by the Pentagon about Iran's intimate involvement in Iraqi violence.

Third, Iran's Supreme Leader, Ali Khamenei, sent a significant signal to Washington only days later during a speech to students at Yazd University. Declaring that the conditions the U.S. has put forth for establishing relations between the two countries currently make it disadvantageous for Iran, he nevertheless made the unprecedented announcement that "nobody said that these relations have to be severed forever" and that "the day when having relations with the U.S. is in our interest, surely I will be the first to approve of such relations."

Khamenei's statement passed largely unnoticed in the Western media, but its significance is undeniable.

Fourth, and perhaps more importantly, U.S. domestic politics has turned against the current course on Iran. The top three Democratic Presidential candidates Barack Obama, Hillary Clinton, and John Edwards are all on the record favouring unconditional diplomacy with Tehran. Furthermore, the winner of the Iowa Republican primary, Mike Huckabee, also favors dialogue. Never before has support for diplomacy with Iran particularly in the middle of an election season been so strong in the U.S.

These developments have all contributed to a perception in the region that not only can the U.S. not sustain its isolation policy, but that some dealings between the U.S. and Iran may already be taking place behind the scenes. Consequently, Arab states have initiated their own diplomatic overtures towards Tehran in order to avoid ending up appearing more hawkish on Iran than Washington. Improving ties with Tehran in the wake of a likely U.S.-Iran thaw is the strategically wise thing to do, the Arabs calculate.

In December 2007, Iranian President Mahmoud Ahmadinejad was invited to address the Gulf Cooperation Council summit in Doha. Not to be outdone by Qatar, the Saudis invited the firebrand Iranian president to Hajj as the Kings special guest. Both invitations were unprecedented. Moreover, diplomacy between Egypt and Iran has intensified in the last few weeks with several high-level visits.

This Arab outreach to Iran which largely is a response to a perception of the likely failure of Washington's Iran policy has made the U.S. effort to contain Tehran all the more unfeasible.

Against this backdrop, the idea of an U.S.- Arab-Israeli alliance being formed to counter Iran's rise a key impetus for President Bush's Mideast tour seems more farfetched than ever. In this context, the incident between five Iranian vessels and three U.S. Naval ships in the Strait of Hormuz this past Sunday may not, as the Bush administration may have hoped, clarify the threat Iran poses to the region.

Rather, the read of regional players may be that the most dangerous source of tension is the current state of no-war no-peace between the U.S. and Iran, which has created an atmosphere in which incidents at sea whether intentional or accidental can escalate into full-fledged wars with unpredictable regional repercussions. As a result, instead of making the Arabs more receptive to President Bush's message, the naval episode may prompt them to further lose faith in the policy of isolation.

Trita Parsi, author of the newly released "Treacherous Alliance: The Secret Dealings of Israel, Iran, and the U.S." (Yale), is president of the National Iranian American Council.

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