Egypt's decision on Saturday to recall its envoy from Israel will remove the last Arab ambassador from Tel Aviv, further undermining a relationship that had started to buckle following the ousting of President Hosni Mubarak in February.
Tensions flared after a cross-border attack earlier this week, with Cairo accusing Israeli forces of shooting dead three Egyptian security guards during gunbattles with Palestinian militants who had earlier ambushed and killed eight Israelis.
The row comes days after renewed verbal barbs between Israel and its one-time ally Turkey, which is still fuming over the deaths of nine Turks last year when Israeli commandos stormed a boat trying to break the blockade of Gaza.
Turkey is demanding an apology for the incident, something Israel is refusing to provide. Now Egypt wants to hear "sorry" too, but all it is getting so far are offers of "regret".
"Egypt is trying to re-educate Israel and is following the same line as the Turkish foreign policy," said Uzi Rabi, director of the Moshe Dayan Center for Middle Eastern studies in Tel Aviv.
Israel's international standing faces a fresh assault next month as Palestinian leaders from the West Bank seek full membership of the United Nations in a General Assembly vote that will expose decades of rancour.
"Israel needs to learn that it is facing a different Middle East," Rabi told Reuters Television.
Israel's 1979 peace deal with Egypt has been the cornerstone of its Middle East policy, providing much-needed stability to its southern flanks and enabling successive leaders to maintain the status quo in the unresolved Palestinian conflict.
Egypt's new military leaders are highly unlikely to tear up the Camp David accords, which brought Cairo enhanced security stability and also gave it access to generous Western funds.
But after an uprising among a populace that is overwhelmingly pro-Palestinian, the military has already shown itself to be more open to the Islamist Hamas group that governs the Gaza enclave and more assertive when it comes to dealing with Israel.
"Israel must be aware that the days when it kills our children without getting a strong, appropriate response are gone for ever," Amr Moussa, a former Egyptian foreign minister and ex-Arab League chief, said on his Twitter feed.
In the heady days following the Egyptian peace deal, which eventually opened the way for treaties with other Arab states such as Jordan and Morocco, many Israelis hoped that they would find partners to forge a reconstructed and secure Middle East.
Those dreams have long vanished and some analysts believe Prime Minister Benjamin Netanyahu and his right-wing government have simply decided to by-pass the region and build alliances elsewhere.
"They don't expect peace with the Palestinians. They are giving up on the Middle East. They are focusing on eastern Europe," said Alon Liel, former director-general of the Israeli foreign ministry.
"If you think like that then you can't expect good relations with your neighbours," he told Reuters.
As ties with regional neighbours sour, relations with some of Israel's closest allies, including the United States, are not as rosy as they once were.
Western diplomats have pinned much of the blame for stalled Palestinian peace talks on Israel, with Washington and European capitals roundly condemning a spurt of recent approvals for settlement building in East Jerusalem and the West Bank.
While the United States has said it will side with Israel in the impending showdown in the United Nations, a big majority of U.N. members are likely to back the Palestinians.
"The real wake-up call will come in September. The Palestinians are headed towards a diplomatic Intifada, not a military Intifada," Liel said, seeing diplomacy rather than street violence as the main threat for Israel.