When Jewish settlers flooded into the Arab marketplace of Hebron in the wake of last week's slaying of Jewish religious student Aharon Gross, Israeli military forces standing by the market made a conscious decision to allow them to burn down Arab property.
This, say Israeli military sources, was to avoid a possible violent confrontation in which furious armed Jewish settlers might have shot at Jewish soldiers had the settlers been thwarted in their revenge.
Against this backdrop, Israeli Defense Minister Moshe Arens has promised that he intends to ''enforce law and order without discrimination or bias'' against Jews and Arabs on the West Bank.
But the Army's experience in Hebron graphically illustrates some of the political and physical difficulties Mr. Arens will have in keeping his promise.
Israeli officials make a sharp distinction between Jewish and Arab violence. Referring to the burning of the Hebron Arab vegetable market, Israeli Cabinet Secretary Dan Meridor drew a distinction between ''those who murdered intentionally (Arabs) and those who afterward caused damage to property (Jews).'' Defense Minister Arens postulated, ''The initiation of the cycle of violence generally or always comes from the Arab part of the population.''
Mr. Arens said, ''The people who have been murdered in the area have all been Jews.''
However, some Israeli analysts dispute this claim. Dedi Tzuker, an activist in the Israeli Citizens' Rights Party, which champions civil rights of both Jews and Arabs, listed five Arabs shot to death by settlers on the West Bank since March 1982. Two were 14 years old. One boy was shot to death by settlers when a group of Arab youths threw stones at a settler bus.
Mr. Tzuker said no settler had stood trial for the shootings. He said he estimated that 400 Arab car windows have been smashed by Jewish settlers on the West Bank - often in revenge for stone-throwing incidents - during this period.
Moreover, some Israelis are worried that increased Jewish settlement in the heart of the tense city of Hebron may spur the cycle of violence. Israel's opposition Labor Party, which refused settlers permission to live in downtown Hebron during its tenure, officially declared this week that Jewish settlement in Hebron would only increase hatred and eventually ''exact a fearful price.''
The defense minister has stressed that he is ''totally opposed to people taking the law into their own hands . . . whether Arabs or Jews.'' He said, ''We'll do all we can to prevent this kind of activity.'' Israeli observers say that Mr. Arens is acutely aware of the damage to Israel's image at home and abroad when the West Bank is portrayed as the Wild West.
However, Mr. Arens confronts both practical and political problems in enforcing the law on the West Bank. For one thing, the question of who holds responsibility for law and order on the West Bank, which has not been formally annexed by Israel but is often treated as if it were, is extremely hazy.
The Israeli military deals with security problems, and the police with ''crime.'' But in reality the police are dependent on the military, and charges have been aired here that Israeli politicians frequently intervene with the military to thwart police investigations of settlers. And police sources say that Jewish settlers are not cooperative when it comes to investigating suspected Jewish vigilantes.
Such allegations were included in the controversial Carp Committee Report, a Justice Ministry investigation of how well Israeli authorities dealt with Jewish vigilantism on the West Bank. Israeli Deputy Attorney General Yehudit Carp resigned from chairmanship of the committee after the report lay untouched for a year.
Defense Minister Arens has met twice with Israel's justice and interior ministers during the last six weeks with the aim of producing a working paper for the government on how to deal with Jewish vigilantism. But he has refused to release to the public the Carp report - which details scores of unpunished Jewish vigilante actions over the last two years - until the working paper is ready.
In practical terms, the Israeli military is hard pressed to deal with ideologically determined and fiercely committed settlers. For example, in the Hebron market affair, so long as the Israeli Army was unwilling to risk armed conflict with the Jewish settlers, it appeared to have no choice but to back down.
''The settlers were in a high state of hysteria,'' said one senior military source. ''In their state of mind, no one could tell what would happen. The prime goal was to avoid loss of life,'' said the military source. He added that settlers ''slashed tires, stoned, and attacked vehicles of soldiers who tried to stop them from torching the market.'' The daily newspaper Davar suggested that the settlers may have deliberately burned the market because that area is where they want to rebuild the city's old Jewish quarter.
The senior military source said that next time ''the Army would try to prevent such a situation from developing, and get hold of the fanatics, the instigators, in advance.''
But settlers, spearheaded by those from Hebron and its Jewish suburb, Kiryat Arba, claim the Army does not give them adequate protection, and demand that their rights to use force be expanded. ''I don't defend the burning, but I say this is inevitable if the government is ineffective,'' said Kiryat Arba lawyer Eliakim Haetzni.
All settlers are entitled to carry rifles or machine guns for self-defense. But they are limited by Army rules that oblige them to first call out or shoot in the air before firing at the feet of an Arab attacker if, and only if, their life is in danger.
Settlers are now demanding more flexible rules about opening fire. ''Until now the attitude toward stone throwing (by Arabs) has been as if it were a minor offense,'' complained Mr. Haetzni.
The settlers' political clout was demonstrated in the firing of Hebron's acting mayor, Mustafa Natche, and his municipal council in the wake of the Gross murder.
All but two of the elected mayors of the West Bank's eight major towns have now been dismissed by Israeli authorities. Mr. Natche's predecessor, Mayor Fahd Kawasmeh, was deported by the Israelis in 1980 after Palestinians shot dead six Israeli settlers in Hebron.
Settlers had pressed Defense Minister Arens to fire Mr. Natche and his council, elected in 1976 in the West Bank's last municipal ballot, but he had declined. ''Until the murder of Gross I did not feel that such a move was warranted,'' Mr. Arens said. He added that after the killing he felt he had ''no choice'' but to confirm the order of the head of Central Command, Gen. Ori Orr, to dismiss the mayor.
Israeli military authorities charge that the mayor and the council ''contributed to the atmosphere of tension, hostility, and encouragement of extreme elements,'' which ''climaxed in the murder.'' But the charges leveled at the mayor appear to have little direct connection with the case. They include failing to provide water, electricity, and garbage collection to the Jewish settlers in Hebron. (Mr. Natche said settlers received some services but he had refused to expand electricity because the settlers had taken over a local school.)
Charges also included ''introducing enemy funds into the region, an apparent reference to $10 million which Hebron received from Saudi Arabia five years ago for municipal services and which Mr. Natche claims was fully reported to the authorities.
Most West Bank municipalities also received development money from a joint Palestine Liberation Organization-Jordan development fund, a practice Israeli authorities officially permitted from 1979 to 1981.
One of the settlers' chief complaints against Mr. Natche was his successful appeal to the Israeli high court for a temporary restraint on Jewish settlers from destroying buildings in the center of Hebron to make way for Jewish houses. This was listed as an ''irregularity'' in Mayor Natche's conduct. But, according to the Jerusalem Post, this charge was deleted from the official English translation of the Army's explanation of the sacking.