With Israel occupying West Bank cities and President Bush calling for Yasser Arafat's ouster in new elections, the Palestinian leader is in a battle for survival among the toughest of his tumultuous career.
But the leaders of Hamas are in high spirits.
The Islamic fundamentalist movement, which calls for Israel's destruction, is convinced it is making big gains among the public with its suicide attacks and rejection of Mr. Arafat's lingering calls to negotiate.
Analysts say Hamas would get about 20 percent of the votes if national elections were held today, making it the leading opposition force to Arafat's Fatah movement. And with its experience in running local institutions and a reputation among Palestinians as untainted by corruption, it could win municipal elections, says Avraham Sela, a leading Israeli analyst.
The expectation of doing well may explain Hamas's decision not to reject Bush's call for polling, though it denounced the rest of his speech.
"It is early to decide about [national] elections, we cannot say the final word about this at the moment," says Ismail Abu Shanab, a Hamas leader. "If the elections are related to the Oslo Agreement or serve Israel's interests we would not participate."
If municipal elections are held, Hamas would participate "because they deal directly with the people's needs and do not have political meaning," he adds.
Amid widespread economic despair and outrage over Israeli military operations, such as a helicopter attack Monday that killed four people along with two senior Hamas fighters, and wounded 12 people, Hamas's hard-line is resonating.
The Israeli army said one of the fighters, Yasir Rizq, had been involved in "a long list" of attacks and was preparing a suicide bombing. But Gazans described the helicopter assault, in which commuters were blasted by shrapnel on their way to work, as a terrorist outrage.
Hamas is also benefitting from the fact that compared with Arafat's Palestinian Authority (PA), which has been ravaged by the Israeli army, its institutions in Gaza are largely intact, analysts say.
That may change soon, with Israeli Prime Minister Ariel Sharon speaking Tuesday of "massive military action" against Hamas in the Gaza Strip to follow up the West Bank offensive, launched after devastating suicide bombings.
Hamas claimed responsibility for a suicide attack last Tuesday that killed 19 Israelis. The attack was followed by a blast claimed by the al-Aqsa Martyrs Brigades, a group linked to Mr. Arafat's Fatah faction.
For now, Hamas is openly defying and even mocking Arafat, something it avoided in the past for fear of arrests.
In an indication of the PA's weakness, police backed down in the face of opposition from attempts to arrest Hamas leader Abdul Aziz Rantisi last week and to place spiritual leader Ahmad Yassin under house arrest Tuesday. The intended actions came after the two rejected a call by Arafat to halt suicide attacks
"The situation now is that the [Palestinian] Authority does not have control over Hamas," says Mr. Sela, a specialist on Arab politics at the Hebrew University in Jerusalem. "The Hamas leaders have lost their fear of the Authority."
Sela believes that with the Palestinian Authority declining, and its territorial domain fragmented by the Israeli army, local factions and groups have moved to the fore. Hamas has strong local institutions and is able to benefit from the shift to localism, he says.
Hafez Barghouthi, editor of the PA's al-Hayat al-Jadida daily newspaper, agrees that in Gaza, the balance of power has changed. "Hamas is very strong and they understand that the [support] for Arafat is low because he disappointed the people by not giving them real changes, by keeping the same ministers in the government."
This comes in contrast to the situation in 1999, when Arafat was at a high point in his power because there was a peace process and hopes of a better future, he adds.
At that time, Mr. Abu Shanab and other Hamas leaders gave limited recognition to Arafat's authority by attending as observers a meeting of the Palestine National Council.
"The difference is that today there is no hope, especially after Bush's confused speech," says Mr. Barghouthi.
In Youssef Najar Hospital in Rafah, Mohammed Khalil, a hospital adminstrator, lay moaning on a bed late Monday after being wounded in the helicopter attack. Three doors away his 11-year-old daughter, Aisha, also lay injured.
Mr. Khalil recalls being hit in the head with scrapnel. "I jumped out of the car with my child. I saw the yellow taxi destroyed, totally wiped out. I was shocked," says Mr. Khalil.
"My child's face was bloody. And this is really terrorism. Who is the terrorist? My child or Mr. Sharon?"
Mr. Abu Shanab, the Hamas leader, standing in the sandy soil outside Mr. Yassin's house, said: "If Arafat cannot stop Israeli attacks against us, he should leave us to deal with the Israelis alone. We have told the Israelis that if they kill civilians, we kill civilians. It is an equation."