There\'s a reason this will be a global war, even if it\'s fought locally.
Israel\'s military, though the envy of virtually every other country is small, like their population with respect to their neighbours. Though better trained and maintained, they are not made to fight long, protracted wars, or to withstand the overwhelming invasion by every nation around them.
If there is a war, then, it will end one of two ways:
1) Good. Israel will manage to hold the line for a week or two, inflicting massive losses, until a forced political settlement is reached. This would also require that the war remain free of gas or WMDs. In any event, this would galvanize \'sides\' to the conflict, making long term peace even more difficult to achieve. At best thousands of lives would be lost, and further hatreds born.
2) Bad. Israel cannot hold the line, either right away or after a few weeks. Political pressure is unable to make a settlement before the invading nations manage to take major areas of real-estate. Arab nations use gas against the military or major population centers. Israel is not backed militarily by the international community (unlikely, but possible, depending on the start of the conflict).
Any of these outcomes would lead to the Israeli response of tactical nuclear warfare, likely against the invading military, but if their invading nations used gas on their cities, possibly even against major enemy cities. As a result of this, the situation would be unresolvable, with both sides loosing. Because of the major environmental, logistical, and infrastructure damage that any conflict of this scale would do, the world would be feeling the effects for years to come, economically and politically, nevermind what it would do to oil.
