This is the season of Christmas, the time of good will, the occasion when tourists usually flock to the birthplace of the Prince of Peace.

Yet there is more fear than peace in Israel as the clouds of war hang over the nearby Persian Gulf. And there is a scarcity of good will as the Palestinian uprising, or "intifada," enters its fourth year. There is a scarcity of tourists, too.The atmosphere was particularly grim the past weekend marking the anniversary of the intifada, which began in December 1987 with stone-throwing protests against 20 years of Israeli occupation in the Gaza Strip and West Bank. Violence of some kind has been a common occurrence ever since. More than 770 Palestinians and 50 Israelis have been killed during that time.

A strict military curfew affecting one million of the 1.7 million Palestinians in the occupied territories helped to defuse any large-scale demonstrations. But one Israeli soldier and one Palestinian were killed.

The specter of violence, both in Israel and in the threats from Iraq, have undermined the tourist industry. Israeli officials had expected a record number of travelers during the Christmas season, but since Iraq's seizure of Kuwait, tourist arrivals have fallen by half. For the fourth year, Palestinian city officials in Bethlehem have chosen to forgo street decorations and holiday receptions in sympathy with the intifada.

How long can Israel function in this warlike condition? The perpetual state of alert, with so many men and women under arms, is expensive. And even after the situation with Iraq is resolved, the intifada and the issue of a Palestinian state in the occupied territories will remain.

The refusal to deal with the Palestine Liberation Organization, the hard-line stance against all proposals for reconciliation and the heavy-handed use of deadly force may all be justified in the eyes of many Israelis, but years of living in such an environment inevitably lead to a state of mind that cannot deal easily with the idea of peace.

One outrage leads to another on each side. The shootings and bombings and mayhem escalate, giving rise to more hatred and a new cycle of suffering and retribution until it encompasses another generation. At some point, this has to stop. At some point, fear must give way to a willingness to take risks in the name of peace. That is never easy, but it can be done.

The Palestinians want peace and their own homeland. The Israelis want peace and a sense of security with their Arab neighbors. Those are not mutually exclusive goals. In fact, they depend on each other for realization.