Tafsir of Al-Isra 17:54

"Your Lord is most knowing of you. If He wills, He will have mercy upon you" (by granting you success in attaining faith), "or if He wills, He will punish you" (by causing you to die in a state of disbelief). This is the interpretation of "that which is better," and these two sentences are parenthetical.

The address here is directed toward the polytheists. It is as if it were said: "Say this word and its likes to them, and entrust their affair to the will of Allah the Exalted. Do not explicitly state that they are among the people of the Fire, for that is something that provokes them toward evil, while the final outcome is unknown to anyone but Him, the Exalted. Perhaps, He, the Glorified, will guide them to faith."

It is apparent that "or" (aw) denotes a true disjunction. Al-Kirmani said: "It is for refutation (idrab), and that is why 'in' (if) is repeated with it." Ibn al-Anbari said: "The 'or' here is used due to the breadth of the two matters in the sight of Allah the Exalted, and it is called the 'permissive' (al-mubihah), like the one in the saying: 'Sit with al-Hasan or Ibn Sirin,' for they mean: 'We have permitted the matter for you.'" This is as you see it.

"And We have not sent you over them as a guardian"—that is, one who is entrusted and delegated with their affair to compel them toward Islam and force them into it. "But We have only sent you as a bringer of glad tidings and a warner." So, deal with them gently, instruct your companions to deal with them gently, endure their harm, and abandon contention with them. This was before the revelation of the Verse of the Sword.