Israel’s recent general election concluded without either Prime Minister Benjamin Netanyahu’s right-wing coalition or opposition leader Gadi Eisenkot’s bloc securing the necessary 61-seat majority in the 120-seat Knesset. Netanyahu’s Likud party and its allies won 53 seats, a decline from their previous 64 seats in 2022, while Eisenkot’s opposition alliance captured 48 seats. This stalemate sets the stage for several weeks of coalition negotiations amid political uncertainty.

Netanyahu has ramped up accusations, alleging that Arab-led parties “stole” the election, a claim dismissed by critics as lacking evidence. The Arab-led Joint List and Ra’am parties made historic gains with a combined total of 19 seats, though Eisenkot’s bloc has ruled out partnering with them, complicating his path to form a government. The Central Elections Committee Chair, Supreme Court Justice Noam Sohlberg, has requested the Shin Bet security agency investigate alleged foreign interference in the election, though these allegations remain unproven.

Market reactions have been negative due to the political deadlock, with Israeli stocks tumbling and the shekel experiencing its sharpest intraday drop since 2023. Analysts expect continued volatility in Israeli financial markets until a coalition is formed and fiscal clarity returns. Despite economic pressures, experts point out Israel’s fundamentals and monetary policy should help buffer the economy during this uncertain period.

President Isaac Herzog will begin consultations next week to appoint a leader with the best chance of forming a stable government, with Netanyahu likely to receive the first opportunity. Coalition talks will last 28 days, extendable by 14 days, but failure could lead to new elections, keeping Netanyahu as caretaker prime minister. The prospect of a national unity government remains slim as many opposition parties have rejected this option, signaling a potentially prolonged political impasse.