When I received the assignment for today, it reminded me of that 1999 book, Dow 36,000. At the time the authors wrote it, the Dow stood at 10,300, and the book became a bestseller. But today the Dow is only 20 percent higher than it was then-it’s only at 12,700. Last February, one of the co-authors wrote an article in the Wall Street Journal entitled “Why I Was Wrong About ‘Dow 36,000’.” “What happened?” he wrote. “The world changed.” Well, what a surprise.

Now there was a lot of talk that sounded like “Middle East 36,000” just a couple of months ago. This is a new Middle East, everything you thought you knew is wrong, bet on revolution and you´ll be rewarded handsomely with democracy. Let’s face it: Americans like optimistic scenarios that end with all of us rich and the rest of the world democratic. There’s much in the American century since World War Two to foster such optimism. But while you enjoy reading your copy of “Middle East 36,000.” I’m going to quickly tell you what’s in the small print in the prospectus-the part that’s in Arabic.

First, the competition. For years, the structure was defined by what I´ll call, for short, the circle and the crescent. The circle was comprised of Turkey, Israel, Jordan, Egypt, Saudi Arabia, and the Gulf states, wrapping around the region. It was an informal alliance of unnatural allies. American credibility and the willingness to use its power kept the circle intact. Opposite it was the crescent, beginning in Iran and stretching westward through Iraq, Syria, and into Lebanon´s Hezbollah and the Palestinian Islamists. Iran´s skill in using its leverage has kept the crescent in alignment. The crescent is smaller but more cohesive and integrated than the circle-largely because it´s mostly Shiite.

These two formations are being transformed. In fact, the circle is pretty much broken, a scene of elbowing and shoving. The deterioration between Turkey and Israel started it, now the scuffling has commenced between Egypt and Israel, and this is only the beginning. In contrast, the crescent is still intact. As Syria wobbles, the Western end of the crescent could come undone. But the crescent is a more natural formation than the circle. Some of those in it happen to be cousins, so it’s more resilient. And even as Iran represses its own people, it’s been able to build bridges to Erdogan’s Turkey and post-Mubarak Egypt, capitalizing on disarray in the circle.

Now, what the competition might look like in 2016 is anyone’s guess. Alliances will have shifted; some states may flip alliances. But the key variable, I think, is whether the United States can or can´t resurrect a stable coalition of unnatural allies. If it can´t, a few cohesive middle powers are going to emerge as rivals for dominance, and they will be testing one another as they jostle to fill the void left behind by the United States.

There are four middle powers: Turkey, Iran, Israel, and Saudi Arabia. They are already operating beyond their borders, with flotillas to Gaza, and rockets to Lebanon, and secret bombings of Syria, and troops into Bahrain. By 2016, the middle powers will have developed more capabilities to do these sorts of things, from long-range missiles to surveillance satellites, and nuclear weapons will be next. And their competition will have intensified. In this respect, the Middle East in 2011 bears a certain resemblance to Europe in 1911. Looking five years out, that´s not an analogy we would want to see fulfilled.

Now you notice I didn’t include Egypt as a middle power. There has been much talk of Egypt returning to its Arab vocation, to its past role as a regional leader. It’s unlikely. Egypt is going to have to recover from the revolution, which will depress the economy as long as uncertainty lasts. Is Egypt too big to fail? That’s going to be the Egyptian question in Washington between now and 2016. Egypt desperately needs to raise the rent others pay for its good will, so while we´ll hear the sound of the rattling sabre, more insistent will be the sound of the rattling cup.

What about the other countries that aren’t middle powers? Iraq, Syria, Jordan, Lebanon, Libya, Yemen, the Palestinians? The defining character of these states is that they are highly segmented. Under a ruthless dictator, they have played larger roles-think of Iraq under Saddam, Syria under Hafez Asad, even the Palestinians under Arafat. But as the era of the dictators winds down, the likely outcome will be a mix of quasi-democratic practices with regionalism, sectarianism, and even tribalism. Violence will be endemic, and disaffected groups on the margins will seek to break away from ineffectual central governments. In some places, the very map may be redrawn. Some of these states are little empires, preserving in amber the interests of the long-defunct empires of Europe circa 1916. By 2016, some of these mini-empires could fracture. And in this volatile situation, Israel is unlikely to part from its own best lines of defense, the Jordan Valley and the Golan Heights.

Finally, a warning label on Islamism. Those who were mesmerized by images from Tahrir Square, and thought that Islamism was passé, saw only what they wanted to see. Today Islamists call the shots in Lebanon, they’ve survived a serious challenge in Iran, they dominate the scene in Turkey, they’re busy planning their creeping takeover in Egypt, and they’re poised to set the agenda for the Palestinians. Democracy, such as it is in these places, is usually a mechanism of Islamist empowerment. No one knows how this will play out by 2016. It does mean that Islamism’s opponents will have to be much more agile than they were when the dictators were doing the work.

So I’ve read you the small print. But this is just a caveat, not a prediction, and the story can be changed. It can be changed by what used to be called a “wild card,” but is now called a “black swan”-something unpredictable yet decisive. There could be an Iranian spring. There could be a breakthrough on energy. China could propel itself into the Middle East. Who knows? No one does.

More to the point, though, the United States could do something to help improve the story. Earlier I said that the key variable is whether the United States can or can’t resurrect a stable coalition of unnatural allies. The way to do this isn’t to resolve their age-old differences-you can’t, and you end up looking weaker for failing. The way to do it is to be consistent in rewarding your friends and punishing your enemies. Then people will want to be your friends, even if they don’t like the company. In other words, to resurrect the circle, you have to clip the crescent. You might not get to “Middle East 36,000.” But you might just prevent a crash.