Egypt's neighbours to the north share their fears and expectations of a new era of regional relations.

Barely a week into his presidency, Mohammad Morsi is already the subject of his Palestinian neighbours' scrutiny. Last week, as euphoria filled the air in an Egypt rejoicing at Morsi's inauguration as president and his symbolic oath in front of a packed Tahrir Square, a mixture of apprehension and hope diffused across Palestine, which had been watching Egypt's revolutionary transition from a bird's eye view.

Many Palestinians view Egypt's ousted president Hosni Mubarak, now lying comatose in a Cairo hospital, as an accomplice in the Israeli siege which has been imposed on the Gaza Strip since 2007. Yet residents of the Strip are optimistic that Hamas' close ties with Morsi's Muslim Brotherhood could facilitate better living conditions for the isolated coastal enclave's population. The relaxing of the tight restrictions of movement through the Rafah border terminal - the only entry and exit point for Palestinians in Gaza - is, here, considered a key element of Egyptian policy.

"Gaza is Egypt's daughter and has long been linked to it. It's also our only doorway to the rest of the world," said Ola Salama, a mother of two living in Gaza City. "Most people here were rooting for Morsi in the hope that the siege would be lifted. We are hopeful that Morsi will do that now that he is president."

Salama's sentiments were reflected across much of the Gaza Strip, when 60-year-old Morsi was declared Egypt's new president. Impromptu celebrations erupted and shouts of jubilation echoed from the mosques peppered across the cities and towns of the Strip. People took to the streets, live rounds of ammunition were fired in the air and fireworks filled the skies. Many handed out candy, and children cheered in an atmosphere reminiscent of Eid celebrations.

Hamas leaders were among Morsi's first well-wishers. The Gaza Strip has been virtually severed from the rest of the world for years, and an economic and humanitarian crisis has been plaguing it ever since. Imposed in 2007, the Israeli blockade has crippled much of its formal economy. In response, a burgeoning smuggler class has flourished; however, most Gazans still subsist on food subsidies from UNRWA and other international donor organisations.

Reconciliation efforts scrapped?

While most Gazans see Morsi as the better candidate, some fear that his victory might adversely affect ongoing reconciliation efforts between Hamas and its rival, Fatah, the faction of Palestinian Authority President Mahmoud Abbas.

In the West Bank, similar fears were expressed by Fatah supporters, who believe that the new Egyptian leadership will bolster Hamas' grip on the Gaza Strip and act as a bulwark against the Palestinian Authority. They say this will topple ongoing efforts to achieve a reconciliation pact between the rival factions, extinguishing any hopes of a subsequent unity government forming in the near future.

Egypt has long played an intermediary role between the two parties as ongoing efforts have attempted to end a long-standing dispute between them. "[Morsi's victory] will mean there will be no reconciliation between Fatah and Hamas. There will be a larger schism between the two parts that constitute our homeland," said Tami Rafidi, a PhD student and Fatah activist from Ramallah.

But during his inauguration address a week ago, Morsi attempted to alleviate such fears, promising to promote internal Palestinian reconciliation and saying that his country "stands by the Palestinian people" and will "work so that they obtain all their legitimate rights".

Both Hamas and Fatah signed a treaty in May 2011 to form a transitional government that will prepare for local and presidential elections within a year - yet resolution efforts have so far proved unsuccessful. Hamas has suspended voter registration in Gaza, accusing Abbas of changing previously negotiated terms of reconciliation, and has asked the PA to stop arresting its supporters in the West Bank.

In a statement carried by the official news agency, Wafa, on Monday, the Palestinian Authority said it was disappointed at the Hamas move, branding it "unwarranted and completely contrary to the understandings and agreements reached at Cairo and Doha". It also called upon Hamas to allow the elections commission to resume its work in the Gaza Strip.

Camp David here to stay

Meanwhile, Israel is watching Egypt's changing political landscape closely, having expressed concerns that a Brotherhood win would affect the 1979 Israeli-Egyptian peace pact.

On the campaign trail, both Egyptian presidency candidates - Morsi and Ahmad Shafiq - insisted they had no intention of scrapping the Camp David Accords, but many Israeli officials were reportedly rooting for Shafiq, the former prime minister who served under Mubarak.

Yet Israeli leaders have so far sent two letters to Egypt's newly inaugurated president, stressing their willingness to cooperate with him. In a brief letter that contained the word "peace" six times, Israel's president, Shimon Peres, congratulated Morsi on his victory and emphasised the importance of safeguarding the treaty between their countries.

According to the Hebrew version of the letter released by Peres' office, the Israeli president wrote: "We look forward to cooperating with you, based on the peace accords signed between us more than three decades ago. It is our duty to preserve and nurture the peace for the benefit of both peoples."

Israel's Prime Minister Benjamin Netanyahu sent a similar letter to Morsi - reiterating that the peace treaty played a decisive role in maintaining regional stability and security. According to the Israeli daily Ha'aretz, Netanyahu "expressed hope for cooperation and for strengthening the peace treaty and peaceful relations between both countries".

The peace treaty is highly unpopular among Egyptians, and many view it as part of Mubarak's sordid legacy. Relationships between Egypt and Israel have often been jittery, but last year tensions reached a tipping point when the Israeli ambassador fled the country after an angry mob stormed Israel's embassy following the killing of five Egyptian officers in a border skirmish.

Palestinians are hoping to cash in on the fact that Israel can no longer reap the fruits of working with Egypt's previous administration, which many here saw as plagued with passivity and complicity. In April, relations between the two countries further soured when Egypt scrapped a long-standing deal it had with Israel to supply the country with 40 per cent of its natural gas. The former Egyptian petroleum minister was also sentenced to 15 years in prison for selling gas to Israel at prices below market value.

Though some Brotherhood members have suggested putting the peace treaty to a popular referendum, in last week's first address to the nation, Morsi made it clear he would heed all international treaties that Egypt had previously signed. "We will respect all international agreements," he said, in a clear reference to the peace treaty with Israel. During his inaugural speech, Morsi reiterated the same reassurances, saying his government would continue to honour its international pacts.

Fatah loyalists say that his speeches are attempts to alleviate Israeli fears. Fatah activist Rafidi, for example, says that "Israel has nothing to be scared of. The Muslim Brotherhood will not do anything to jeopardise Camp David. In fact, if there's anyone who will make any political concessions, it's those shrouded in political Islam: Hamas here or the Brotherhood in Egypt."

Observers contend that, similarly, Israel will work to preserve the peace pact, as they currently have too many "open fronts" - Gaza, Iran, Syria - to jeopardise the existing relationship. "The Israelis have to accommodate themselves with the new Egypt in order not to sabotage the Camp David Accords or the current security arrangement," said political analyst Mahdi Abdul Hadi.

Unsustainable status quo

Analysts anticipate that Hamas, the Brotherhood and other Islamists will follow a more pragmatic, new political Islam - akin to politicians in Tunisia or Turkey - where power-sharing agreements between religious and secular leaders are underway. But a sea change such as this cannot occur without a change in attitude from the PA.

"It needs the political will in Ramallah to overcome the current impasse and to free itself from Israeli threats as well as occupation," Abdul Hadi said. The status quo appears to be unsustainable: a somewhat paralysed PA is waiting on progress on the peace process, while maintaining security with Israel.

Many believe that the PA is under the gun to change this policy. As Israel continues to unveil new settlement expansion plans in the West Bank and impose a blockade on Gaza, Abbas' administration is rapidly becoming more isolated, and Palestinians are becoming increasingly exasperated. Some say the new leadership in Egypt will no longer rubber-stamp any PA policies beneficial to Israel that disadvantage Palestinians, many whom are frustrated and searching for ways to recreate a Tahrir Square in Palestine.

Young Palestinians especially attribute Morsi's victory to the Egyptian public's protests at Tahrir Square. In the words of Yassmine Saleh, a 29-year-old Palestinian-Egyptian woman living in Ramallah: "The real lesson learned here is that the power of people to protest made the change happen and Morsi is the face of that change.

"We will be able to get rid of our own repressive regimes if we do the same."

Source: Al Jazeera