Recent violence in the central Syrian city of Homs looks grim. Beginning last Friday and continuing over the weekend, tit-for-tat killings between the city’s Sunni Muslim and Alawite communities resulted in thirty deaths. By Monday, residents described the city as gripped by fear. Shops were closed, sporadic gunfire rang out across the city. A Facebook page was set up last week that describes Alawites as “pigs” and urges Sunnis to attack the Alawite-led government.The worst case in Syria is all out ethnic and sectarian war — like Lebanon but on a much bigger scale. We aren’t there yet but that outcome could be surprisingly hard to avoid.Compared to Egypt, Syria has a much greater potential for chaos and violence; a much lower potential of muddling through without dramatic change, and a somewhat higher chance of moving toward a significantly more pluralistic society.Mead advice to investors: wait and see. To policy makers: Assad is slowly weakening so work the transition. Getting this wrong could blow the whole region sky high.