Iran and Israel are two countries at loggerheads. Former Iranian President Ahmadinejad’s explicit statements threatening the very existence of the state of Israel and speculations on a possible Israeli attack on Iran have headlined the news on a regular basis. When evaluating Iran and Israel, one should keep in mind some general remarks with regards to the nature of their relations. The two have no direct territorial conflicts and have never engaged in war against one another. Besides the ideological legitimacy that Israel provides Iran, the conflict is essentially a strategic one. Although employing Islamist arguments and giving support to Islamist movements such as Hamas, Hizballah, and Islamic Jihad, who have given new meaning to the Arab-Israeli conflict by defining it as a religious crusade rather than a national conflict, Iran’s actions have been strategic. Iran has thereby been able to directly involve itself in the Arab-Israeli conflict on several fronts while positioning itself as a powerful contender for leadership in the Middle East arena. The new president-elect Hasan Rohani offers a more moderate perspective on Iran's foreign policy. It seems that Rohani, who is fully committed to his voters and would like to deliver on the economic and social fronts, will have to modify Iran’s approach to its nuclear project in order to ease the sanctions on Iran. However, this poses Israel with a new challenge. Yet Rohani concurs with hardliner Ahmedinejad’s view that Iran has the right to a nuclear program; as such, even if he adopts a more moderate foreign policy, he will continue to strive for a nuclear Iran. Israel must get ready for such a challenge, particularly if and when the U.S. puts Iran under Rohani to the test. The U.S. is likely to offer Iran a grand bargain on all the regional security issues. It is reasonable to suppose that the U.S. will give Israel assurances that such a bargain will not compromise Israel's vital security interests. Nevertheless, such a bargain presents Israel with a real security dilemma. If a deal is made, and the safeguards are not rock solid, or Iran pursues its nuclear program in secret (or attempts a plutonium backdoor), then Israel may face an economically healthy nuclear-armed Iran in the near to midterm.