Israel faces weeks of coalition horse-trading as neither bloc achieves majority

The final tally of Israel’s elections leaves Prime Minister Benjamin Netanyahu’s right-wing bloc and the opposition led by former military leader Gadi Eisenkot short of the 61 seats needed to form a government.

The result sets up weeks of coalition negotiations and political uncertainty, with the opposition alliance facing an uphill battle to cobble together a majority government in the 120-seat Knesset.

Netanyahu’s Likud party and its far-right allies won 53 seats in the Knesset, according to the Central Election Committee, fewer than the 61 needed for a majority and down from 64 seats in the 2022 elections.

The main opposition bloc, led by Eisenkot, won 48 seats, far short of the 61 needed for a majority.

Eisenkot now faces a difficult coalition path. Most parties in his bloc refused to rely on Arab-led parties, while Eisenkot said none of them met his conditions for a partnership. The Joint List and Raam together won 19 seats, an all-time record for Arab-led parties.

Netanyahu’s party has stepped up its claims that Arab parties “stole” the election, amplifying an allegation that spread after exit polls showed the prime minister’s bloc suffered a setback.

Likud claimed Thursday, without evidence, that the foreign interference “aimed to facilitate a foreign takeover of the Knesset, the Islamization of Israel and the overthrow of the right-wing government.”

The statement came a day after Supreme Court Justice Noam Sohlberg, who chairs the Central Election Commission, asked the Shin Bet security agency to investigate “serious suspicions” of improper influence via funding from foreign entities.

Sohlberg said he could not attest to the substance of the suspicions and asked agencies to verify the allegations.

Qatar, accused of trying to mobilize Arab voters, has denied any interference in the elections, calling the allegations “ridiculous and dangerous at the same time.”

Opposition leaders also called for a thorough investigation, while warning against using the allegations to cast doubt on the election results or influence them in any way.

Although vote counting has been completed, the results remain subject to possible “minor corrections” before being certified and submitted to President Isaac Herzog next Wednesday, according to the Central Election Commission.

The new Knesset is due to be sworn in on November 10, while parties have until November 18 to contest the results.

A prolonged political stalemate could leave Netanyahu as interim prime minister through a new round of coalition negotiations or potentially new elections. A return to war with Iran also remains a major risk.

“Bibi (Netanyahu) is known as a ‘comeback child’. He did not become the longest-serving prime minister by chance,” said PR Kumaraswamy, professor emeritus at Jawaharlal Nehru University, adding that he expected Netanyahu to maintain his current approach on Iran and Gaza for now.

Israeli assets have been under pressure this week, with the shekel suffering its worst intraday decline since 2023 on Wednesday before regaining ground. Tel Aviv’s benchmark stock index fell 4.1% for the week Friday morning, according to LSEG data.

“We expect some short-term volatility for Israeli assets until a new government is formed and decides on fiscal consolidation and war-related spending,” said Eirini Tsekeridou, a bond analyst at Julius Baer. She added that Israel’s economic fundamentals and monetary policy should provide support.

President Herzog will begin consultations with the competing parties next week and name the leader he believes has the best chance of forming a majority government.

Netanyahu could receive the first call to launch the 28-day process of building a coalition that could be extended to 14 days.

If these efforts fail, new elections will be called, with Netanyahu remaining in power on an interim basis. Previous efforts to form a government lasted between 20 and 100 days, according to the Israel Democracy Institute.

Netanyahu could also push for a national unity government, arguing that the country should unite as it faces conflict on multiple fronts, although many of his opponents have ruled out such an arrangement.