The worsening war has emboldened Iran, now clearly striving for regional hegemony across the Muslim Middle East and possibly a nuclear weapon. North Korea, which tested a nuclear warhead in October, is less intimidated by the United States than it was several years ago.

In early January, Bush is expected to announce major changes to his Iraq strategy that are likely to cover U.S. troop deployments and missions, the stalled political reconciliation process in Baghdad, and Iraq's economic development. Meanwhile, the violence in Iraq continues as insurgents and sectarian militias kill at will and American opinion on the war darkens.

"2007 is really our last chance at the kind of Iraq we're hoping to help the Iraqis build," said Ken Pollack, a Middle East expert at the Brookings Institution in Washington. "If it doesn't happen next year, it's not going to happen at all."

At home, Bush has been weakened. The midterm elections cost Republicans their dominance in Congress largely because of angst over Iraq while the independent Iraq Study Group slammed Bush's handling of the war and raised questions about its justification.

The Pentagon has started pushing back against the White House as well. Army Chief of Staff Gen. Peter Schoomaker recently told lawmakers the beleaguered Army is near the breaking point and needs to be enlarged.

"The Army is incapable of generating and sustaining the required forces to wage the global war on terror," he said. "We don't know what's ahead ... Our history is replete with examples of where we have guessed wrong — 1941, 1950, 2001."

Here's a breakdown of what Bush faces in 2007:

Iraq

Despite the unpopularity of the war and calls for a policy change, Bush maintains his plan for Iraq is "victory," which means a stable government and an effective security force.

But he faces an intractable sectarian and tribal war waged alongside a raging insurgency.

Iraq can't advance politically because of the violence, which in turn is aggravated by the government's inability to act.

If Iraq cannot be pulled back from the precipice of civil war, experts say, then it must be managed as a failed state. That would entail containing the violence and trying to keep neighboring countries from invading to cover their interests.

Iran

The emboldened Shiite theocracy is pushing ahead with worrisome nuclear research that the U.N. Security Council seems unwilling to counter aggressively mainly, because of roadblocks created by Russia.

It raises the question: Should Israel or the United States bomb Iran's nuclear facilities and risk an all-out Middle East war — or potentially let the avowed enemy of Israel go nuclear?

As part of a regional strategy to spread its influence, Tehran is supplying weapons and expertise to fellow Shiites in Iraq, now running death squads, and in Lebanon, where they threaten neighboring Israel and the U.S.-backed government in Beirut.

Afghanistan, Pakistan

American casualties are rising in Afghanistan while the Taliban is resurgent, thanks to support from radical elements in neighboring Pakistan.

"Pakistan basically is a sanctuary," said Anthony Cordesman, a former Pentagon official and now military expert at the Center for Strategic and International Studies. "There are elements in Pakistan that directly support the Taliban."

So far, Bush has refrained from placing too much blame on Pakistani President Pervez Musharraf, an otherwise valuable ally in the war on terrorism who has escaped repeated assassination attempts.

Lebanon

The U.S.-backed democracy in Beirut could collapse any time under pressure from a coalition of Hezbollah-led Shiites and Christians, possibly lighting the fuse to another civil war.

That would be a major loss for Bush, who has touted the government as a shining example of the potential for democracy to help stabilize the Middle East.

Israeli intelligence has reported that Hezbollah is rearming with more of the short-range missiles it fired on Israel last summer when the two bitter foes fought a brief but highly destructive war.

Israel, Palestinian territories

Bush has come under increasing pressure from European and Arab allies to re-engage the comatose Israeli-Palestinian peace process.

This conflict is considered a major source of tension in the Middle East, but it shows no signs of abating.

Hamas militants continue to strike at Israel from Gaza, threatening to provoke a stern response from Israeli Prime Minister Ehud Olmert, now under fire for holding back.

The situation could further destabilize if Hamas and its political rival, Fatah, escalate their conflict into a full-blown Palestinian civil war.

Asia

China's military buildup and North Korea's successful nuclear test threaten to destabilize Asia.

The six-party talks aimed at weaning Pyongyang off its nuclear ambitions have once again failed. In addition to a growing nuclear arsenal, the Stalinist state has 300,000 conventional missiles aimed at Seoul and U.S. troops on the Korean peninsula.

Faced with a nuclear adversary across the Sea of Japan, Tokyo is building up its conventional forces and has started talking about nuclear weapons.

Nuclear weapons

North Korea and Iran underscore the growing global appetite for dangerous nuclear technology.

The International Atomic Energy Agency, the U.N.'s nuclear arm, estimates that about 40 countries have the desire and capability for nuclear programs that could produce a weapon.

Bush has declared the potential nexus of nuclear weapons and terrorists as the single greatest threat to the United States.