Beirut has always been one of my favourite cities.

During the years of living there and making numerous subsequent visits I've always been struck by the sharp juxtaposition of volatile politics, conservative religious beliefs and crass consumerism that makes for the city's character.

In Beirut's streets it's not uncommon to see billboards advertising fashion icons like Armani sitting cheek-by-jowl with those extolling the military victories of the Shi'a Islamist political party and militant group, Hezbollah.

Whatever your take, there's no denying that Hezbollah is a formidable political and military entity. Many years ago I had the opportunity to interview its former secretary-general, Subhi al-Tufayli, in Hezbollah's stronghold in the southern suburbs of Beirut.

Some years later during the 2006 Israel-Hezbollah War, I returned to that part of the city the morning after a massive Israeli airstrike to see for myself the canyons of ruins created by the bombardment.

No sooner had I set foot in the neighbourhood than two Hezbollah security men on a motorcycle intercepted and detained me while a check was done on my background to make sure I wasn't a "spy."

That they were able by radio not only to conduct a rapid identity check but tell me that I was still on record from my meeting years before with Subhi al-Tufayli, speaks volumes about the efficiency of Hezbollah's security and administrative structure.

Back in 2006 Israel's onslaught against Hezbollah was meant to neuter the group once and for all. That was not to be, and Israel was forced to think again. Today Hezbollah's military prowess remains a force to be reckoned with. This much was evident on Wednesday when its fighters launched a salvo of missiles killing two Israeli soldiers as they rode in unmarked civilian vehicles along the Lebanese border.

Immediately the attack led to speculation that a full scale show-down was again imminent between these two bitter enemies. But yesterday both sides signalled that their rare flare-up in fighting across the Israel-Lebanon border was over for now.

In Beirut, a Lebanese source said that Hezbollah was not interested in further escalation. For its part, Israel informed Hezbollah via the United Nations Interim Force in Lebanon (UNIFIL) "that it will make do with what happened on Wednesday and it does not want the battle to expand".

This of course begs the question of just how plausible these mutual overtures of de-escalation really are?

In assessing this it's important is to see these latest events in the broader context of the Syrian civil war. Two crucial factors are at play here in shaping the response of both sides.

From Hezbollah's perspective the war in Syria has placed a substantial demand on the group's resources. Since early in 2013 Hezbollah has been openly fighting in Syria alongside the Assad regime and the group has proved pivotal in a number of key regime victories along the Syria-Lebanon border.

But just as Hezbollah has helped shift the balance of power in the Syrian war, the conflict has also moved new pressures on to Hezbollah.

Some analysts even suggest that the Syrian war and its demands have exposed cracks in Hezbollah's organisation, this pressure not so much ideological but more financial, material and in terms of manpower. This in itself of course would not act as a deterrent to Hezbollah taking on its old enemy.

For some time now Hezbollah has been successful in opening a new front in the region's Golan.

With this the group along with its backers, Iran, has a new, non-Lebanese zone it can utilise to target Israel, and this week's attack was only the latest manifestation of that.

Using proxy groups in the Golan, Hezbollah is able to turn the screw on Israel.

As one Israeli general was recently quoted in Foreign Policy magazine as saying, "Hezbollah gives these groups the IEDs (explosives) and the Iranians give them the inspiration."

Naturally, Israel is worried about this creeping territorial encroachment and the military threat it poses. So far though Israeli retaliation has been comparatively measured by its own usual standards.

The last major fight in Lebanon went badly for Israel, and this perhaps will make the Israelis think long and hard before sending ground troops into Lebanon again. Moreover, the latest Israeli casualties come as the country Israel gears up for a March 17 general election.

With this in mind no doubt Prime Minister Benjamin Netanyahu is probably still weighing up the political costs of Israel's offensive on the Gaza Strip last year against the Palestinians, whose arsenal is dwarfed by the powerful long-range rockets, other weaponry and fighters Hezbollah's has at its disposal.

In short, right now a repeat of the 2006 conflict, which was seen as botched, would be politically disastrous for the Israeli government. That said, Israel is a country on a virtually permanent state off readiness and there are already some signs it is positioning itself for a further response to Hezbollah that goes beyond political rhetoric.

Right now the region will be grateful for the gestures towards de-escalation. Both Israel and Hezbollah are walking a fine line. Each needs to show the strength to deter actions by the other. On the other hand both, for now, will want to avoid becoming embroiled in another bloody all-out showdown.