Iraq has served its purpose.
(The history of 2006, written in the future tense.)
Note: this is a hypothetical scenario
The invasion of Iraq plus the cartoon fiasco have successfully galvanized Muslim resistance to continued US/UK intervention in the Middle East.
In the face of the collapsing situation in Iraq, Iran will take the opportunity to invade Iraq along with support that it has spent two years fostering from within the beleaguered nation. If the US are lucky they may get out of the country without thousands of their troops being slaughtered in retaliation for the relentless bombing.
While the US are still reeling from their withdrawal and combat morale is low, Iran will fall upon the weak and wealthy Gulf states of UAE seizing their assets, garroting the Shah of Abhu Dabi and chasing the sheik of Dubai back to London.
Having learnt the lessons of the Iraqi invasion of Kuwait in 1991, they will then quickly and efficiently move into Saudi Arabia with the help of a quickly formed (and US trained) Iraqi force, taking Riyadh and the holy cities before the Saudis can act to rally a strong enough ally to fight with them. Weakened morally and militarily by the war in Iraq, and not having a necessary defence alliance in place (or more importantly having the disagreement with them over Iraq still in place) the US will not be in a position to offer more than a half pie contingent. This will be exacerbated by Bush dithering and dallying, paralysed by fear, incompetence, and a leadership challenge, long enough for the Muslim uprising to reach the borders of Israel, before the US does anything. This will be aided and abetted by plenty of support from ordinary Saudis rising up against US supported monarchic regimes. Once the whole of Saudi Arabia is in their hands, the invaders will be secure in the knowledge of the experience of Iraq that the US will not attempt to retake it.
The US will be powerless to do anything. Its government will be in disarray. It will not be able to get a mandate from the UN for any action. It will not be able to carry out any random bombing because it will have run out of credible excuses in the face of global opinion. The experience in Iraq will mean that it will certainly not have the resolve to re-invade.
Under strong leadership and with a common enemy in the US, tribal differences will be quickly overcome and a stable federation formed between the different ME countries. Order in Iraq will be restored and it will start rebuilding and pumping oil. Strong trade links with China, Russia, Germany, France and other nations not involved in the Coalition of the Willing, will ensure that this new Islamic Caliphate prospers. In the rich Gulf states it will be business as usual, politics and business remaining separate, and the 95% of Dubai who are expats will continue to do work there under protection of the Caliph. The UAE will continue to be wealthy, but now ruled by different masters.
Israel, no longer a big fish in a small pond will be a small fish with a rather large shark on its tail. However it will continue to exist in an uneasy truce with its larger adversary. The prospect of emigrating direct from New York to Tel Aviv will no longer hold the lustre that it used to. Cartoons depicting the Muhammad will be conspicuous by their absence from newspapers and internet sites everywhere.
An Islamic caliphate running from the Suez Canal to Afganistan is what this world needs. It would be therapeutic and cathartic for all the Muslims of the world, would relieve Muslim non-Muslim tension and eliminate terror.