If Egyptian unrest turns into an Egyptian revolution, the implications for the Arab world - and for Western policy in the Middle East - will be immense.

Egypt matters, in a way that tiny Tunisia - key catalyst that it has been in the current wave of protest - does not.

Egypt, the most populous Arab state, can help determine the thrust of Arab policies - whether towards Israel or Iran or in the perennial quest for Arab consensus on issues that matter.

“Go, go, Mubarak go” and “the people need to end this regime” shouted the angry crowds around al-Istiqamma mosque in Cairo’s Giza Square, as they shook their fists at the lines of helmeted riot police after Friday prayers.

Within minutes, water cannon showered the demonstrators and there were loud thuds as tear gas canisters were fired.

People ran into the side streets of this poor neighbourhood, on the edge of the capital, with their eyes streaming.

“Let the world see what is happening in this country,” yelled one elderly man. “We will never stop until this… government goes.”

Ordinary Egyptians appear to be losing their fear of direct confrontation with the security forces. There have been bloody and drawn out clashes all over Cairo and in some of Egypt’s main cities.

They have a long list of grievances and the demands are an explicit challenge to their rulers.

“We want a real democratic system. This regime of Hosni Mubarak has been in power for 30 years,” declared Ahmed, a man in his 20s.

“I was unemployed for five years. I had to move to the United Arab Emirates. This is what I was dragged into. My son will not suffer what I have suffered. This ends here.”

If the Mubarak regime were to collapse - which is still a big “if” - the fall-out would affect virtually every key player in the region and every key issue.

• For Arab autocrats, it would signify the writing on the wall in a far more dramatic way than the fall of the Ben Ali regime in Tunisia.

• For Arab protesters, it would be a great boost, fuelling the idea that the region has entered a new era of “people power”.

• It would deal a blow to an already enfeebled Middle East peace process. Egypt was the first Arab state to sign a peace treaty with Israel, back in the 1970s. A change of regime would alarm Israeli leaders and deepen the siege mentality among many Israelis.

• It would affect business confidence, regionally and even globally, especially if oil prices shot up.

• Finally, it would pose painful dilemmas for Western policy-makers who have long favoured gradual political reform in the region, fearful that the alternative could be the breakdown of stability and the rise of extremism.

Israel watched fearfully Saturday as anti-government unrest roiled Egypt, one of its most important allies and a bridge to the wider Arab world.

Writing in the Haaretz daily, columnist Aluf Benn speculated that President Hosni Mubarak’s “fading power” leaves Israel with few friends in the Middle East.