The narrative goes like this:
Over the past few decades, Israel had developed an excellent intelligence network. Hamas is a constant threat to Israel, so Mossad would be sure to stay informed of Hamas' activity at all time, using their network of spies and informers. Even though there is a blockade, they will be aware of Hamas smuggling and stockpiling weapons in Gaza, and how many rockets have been assembled out of steel pipe and rusty nails.
Israel knows from experience that they cannot afford to take their eye off the ball. Hamas will take any opportunity to launch an attack against Israel. And yet, in the weeks leading up to October 7, the IDF moved troops away from the border, ignored the reports of women observers stationed near the border, and ignored the warning of a veteran analyst in Israel's intelligence agency.
The most charitable explanation is that they were distracted and lost focus just long enough for Hamas to launch their attack. This explanation does not make sense. Israelis are amongst the smartest people in the world. It is unlikely that they will allow themselves to be bamboozled by a handful of smelly terrorists squatting in dank and dripping tunnels deep under Gaza.
A darker, more CT like explanation is that Israel cynically allowed the attacks to happen, knowing that Israelis would lose their lives. This would give them a pretext for invading Gaza, destroying the infrastructure, flattening the buildings, and soften up the citizens to make them more receptive to the idea of moving away permanently.
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What would you do if you were Netanyahu? He knows that destroying Hamas is not enough. As long as Palestinians live in Gaza, there would be an endless stream of new terrorists. In order to stop that, he has to prevent Palestinians from living in Gaza. The best way to do that is to make Gaza uninhabitable. A thousand Israelis had to die to enable this plan. He believes it is better to take the hit up front, and never worry about terrorists in Gaza again, than to constantly watch Israelis die every couple of years.