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Israel said an Israeli battalion commander was killed, and Lebanon claimed at least two of its soldiers and a journalist were killed in shelling. 

According to the New York Times:

The skirmish began when Israeli soldiers were conducting activities along the border area. There are conflicting reports about whether Israelis were installing a surveillance camera on a fence or clearing a tree.

Lebanese officials said Israelis had crossed the border into Lebanon, but Israeli military officials denied the claim, saying they were in Israeli territory.

Lebanese soldiers said they fired warning shots at the Israelis, prompting a brief but heavy exchange of fire.

Israeli military officials said they returned fire with light arms and artillery and then dispatched helicopters several minutes later to attack a Lebanese command center, damaging several armored combat vehicles.

This marks the most serious combat along the border since the month-long war between Lebanon/Hezbollah and Israel in the summer of 2006.

http://www.latimes.com/news/nationworld/world/la-fg-israel-lebanon-20100804,0,6928535.story

http://dover.idf.il/IDF/English/News/today/10/08/0302.htm

And the History Guy page at http://www.historyguy.com/iranwar.htm

Two recent developments in particular shows that Israel is growing increasingly concerned.  First, the Israeli cabinet decided to fund a program to provide gas masks to all Israelis.  This is an obvious preparation for the possibility of missile attacks on Israel from Iran and/or Iranian allies Hamas, Hezbollah, and Syria.

Second, on January 12, 2010, a leading Iranian nuclear scientist was assassinated by a remote-controlled bomb in Tehran.  It is widely assumed that Israel is behind this killing in an apparent attempt to delay the Iranian nuclear program. 

See also: http://www.historyguy.com/iranwar.htm

http://www.historyguy.com/iranwar.htm

The Israeli army said the battles broke out late Tuesday, Nov. 4, after Israeli forces found a tunnel in central Gaza built by Hamas in order to abduct Israeli soldiers. A Israeli special army unit destroyed the tunnel. One Palestinian was killed in the gunbattles at the tunnel.

The timing may be coincidental, but it is interesting that this clash took place on the same night that the American Presidential campaign concluded with a victory by Democrat Barack Obama.  Many people worry about a possible Israeli-American strike at the Hamas/Hezbollah/Syria/Iran alliance in the waning days of Republican control of the White House.  Might this small battle lead to more clashes on other borders, with a possible Iranian and/or Syrian response?

This situation bears watching…

Meanwhile, reports from Syria indicate a movement within the ruling circles of the Baathist government in Damascus, that Syria must perform some sort of military response to what is now an overt attack by Israel. 

Both sides have spoken of being prepared for war this summer, along with publicly alleged desire for peace.  Syria has been upgrading its military, particularly its missile forces, with large purchases from Russia.  Israel has spent the summer with increased training for its ground forces.  The Israeli army performed poorly in its combat with Hezbollah in the 2006 Second Lebanon War. 

The War and Conflict Journal believes that the evidence of mutual military buildups, internal politics in both countries, and a perceived sense that "something" must be done about each other. Both Israel and Syria see each other as a major threat, and many leaders in each nation feel that a war may serve as a way to either reduce a perceived threat, or prove to itself and its allies that it can stand up to the ancient enemy.

A new Middle Eastern, Arab-Israeli War is about to begin, and it will be the bloodiest, most expensive war in Israel’s history.  This time, Syria has missiles that can drop large conventional (and chemical) warheads on Israeli cities.  Once war begins, Israel will have to seize Syrian territory, up to and including the capital of Damascus, in order to force the missile attacks to stop.  Such a war could easily tempt Hezbollah to launch its missiles and rockets at Israel again, as they did in 2006.  Lebanon would again become a battleground.  And Iran, ally and patron to both Syria and Hezbollah, may also enter the fray, which in turn could cause the United States and other Western allies to join the war as an opportunity to abort Iran’s growing nuclear abilities.

A 2007 October War could easily escalate into a regional nightmare.  All sides must tread carefully.

Syrian official: Damascus eager to respond to Israel flyover–YNet News, Sept. 20, 2007

Netanyahu confirms secret attack on Syria–The Guardian, Sept. 21, 2007