As Christmas neared, an 85-foot-high tree presided over the little square in front of the Greek Orthodox Church of the Annunciation in Nazareth. Kindergarten children with Santa Claus hats entered the church and listened to their teacher explain in Arabic the Greek inscriptions on the walls, while a group of Russian pilgrims knelt on their knees and whispered in prayer. In Nazareth's old city, merchants sold the usual array of Christmas wares.

This year, however, the familiar rhythms...