The apparent suddenness of the capture of Mosul, Tikrit and other Iraqi cities by Sunni insurgents fighting under the banner of the Islamic State of Iraq and Syria/the Levant (ISIS/ISIL) reverberated throughout many world capitals and especially Washington, D.C.

After expending 4500 American lives and a trillion dollars or so of national treasure in the ill-conceived invasion and incompetently executed occupation of Iraq, clearly the United States has more than a passing interest in these latest events as well as a huge responsibility for them. And the ruthlessness and heavy handedness of Prime Minister Nouri al Maliki's autocratic and sectarian rule likewise bears a heavy burden of responsibility and accountability.

That said, this is not 1939 and Hitler's assault into Poland or 1941 and Japan's attack on Pearl Harbor. Yes, ISIS/ISIL is a dangerous group. It must be contained, neutralized and eliminated. However, every setback should not be immediately turned into a calamity or catastrophic defeat.

First, Iraqi parliamentary elections held on April 30 have not yet led to the formation of a new government. Maliki's Dawa party took a real pasting. Hence, a new government could easily have a more moderate and secular prime minister who could actively reconcile with the Sunni and Kurdish moderates.

Second, Iraq's most powerful politician the Grand Ayatollah Ali al Sistani has called upon all Iraqis to rise to the defense of their country. Even if the ISIS insurgents collect a number of Sunni insurgents and past supporters of Saddam Hussein, they are not a well-equipped fighting force. The balance will shift to government forces now that the initial shock of the onslaught has been digested.

Third, if the U.S. is smart, bold and courageous, the threat of ISIS/ISIL, which is real, offers new opportunities in the region. More will shortly follow on that.

Two conflicting historical experiences define the possible outcomes. In 1778 after British General "Gentleman Johnny" Burgoyne was defeated at the Battle of Saratoga by the Americans, a student of the famous Scottish economist Adam Smith fitfully declared to his professor that "we are ruined." "My boy," Smith replied, "there is a lot of a ruin in a nation." And that realism may apply to Iraq.

On the other hand, ten days less than a hundred years ago, Austro-Hungarian Archduke Franz Ferdinand and his pregnant wife Sophie were shot to death in Sarajevo. Weeks later, World War I erupted. Iraq, Syria, Libya, Iran, Ukraine and other crisis spots that stretch from the eastern Mediterranean to the Bay of Bengal could indeed explode into regional war. That is the worst case.

For the time being and unless the people of Iraq and its government prove to be incompetent in the extreme, the example of Adam Smith and not Sarajevo should win out. There are no guarantees. So, for vital geostrategic reasons as well as a common-sensical insurance policy, the Obama administration needs to think more broadly and boldly. That will be difficult because it will require undoing some really "stupid stuff" that marked prior policy statements.

The president demanded that Syria's Bashar al Assad must go and drew "red lines" over the use of chemical weapons. He has taken no option off the table (except containment) in preventing Iran from obtaining nuclear weapons. And, no matter what steps the U.S. might or might not take, Washington will end up in the contradictory position of simultaneously supporting both alleged friends and foes, such as aiding a Shia Iraq that supports our declared enemy of Shia Assad.

The opportunity lies in quiet, almost Kissinger-like secret diplomacy with Iran, Saudi Arabia and Israel. A grand bargain is the goal. All three states have reason to fear ISIS as threats to each. Some arrangement that leads to the recognition of Israel with the denuclearization of Iran and reconciliation with Saudi Arabia may be a bridge too far. However, it is a bridge worthy of building and crossing.

The political domestic costs for Obama will be huge whether or not this diplomacy works. If it fails and leaks, Republicans will have field day. If is succeeds, Republicans will rip the administration to pieces over any rapprochement with Iran. We could and did forgive Vietnam after 58,000 Americans gave their lives in that war. But we somehow cannot forgive Iran for holding 54 Americans hostage for 444 days thirty-five years ago.

If that or other bold and imaginative initiatives do not follow, then the likelihood of a 21st century equivalent of the June 28th, 1914 assassination and a regional war becomes a worrying and possible nightmare scenario.

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Harlan Ullman is Chairman of the Killowen Group that advises leaders of government and business, Senior Advisor at Washington D.C.'s Atlantic Council. This column comes from his latest book, due out this Fall, is A Handful of Bullets: How the Murder of Archduke Franz Ferdinand Still Menaces The Peace.