Tough talks

The right bloc took a heavy hit following Netanyahu's political gamble to join his center-right Likud party with right-leaning Yisrael Beytenu and to pepper its list with more hardliners, which evidently isolated voters and cost Netanyahu dearly at polls for the 19th Knesset.

Likud-Beytenu secured 31 seats in the 120-seat Israeli Parliament; 11 seats less than the 42 it held in the last Knesset and two seats less than recent polls indicated it would secure.

With 99 percent of votes counted by the Central Elections Committee, and the biggest voter turnout since 1999 (66 percent) the right and left blocs are now evenly split, winning 60 seats each in the next Knesset in a surprising swing further to the left than recent polls suggested.

Likud-Beytenu was still the highest polling political party despite its fall in fortunes, and Netanyahu immediately announced that he was commencing coalition negotiations.

"I want to thank the millions of Israeli citizens peacefully exercising their democratic right today," he wrote on Facebook, when early exit polls indicated that the right bloc would obtain a slight advantage.

"The exit polls clearly indicate that the citizens of Israel want me to continue to serve as prime minister of Israel and form the widest possible government. The results are a great opportunity to make many changes for the benefit of the citizens of Israel."

Surprising success

The biggest surprise in the election was the success of brand new centrist party Yesh Atid (There is a Future), led by recently retired journalist Yair Lapid, which secured 19 seats and will be the second-largest party represented in the next Knesset.

Lapid is a natural ally for Netanyahu, and his newfound political clout could force Netanyahu into a less hawkish stance on key domestic and foreign policy issues in order to form a coalition.

Lapid has previously stated that he only wants to be part of a government that restarts peace talks with the Palestinians, as opposed to Netanyahu's ease with the status quo. They are closer on policy regarding a united Jerusalem under Israeli control and the rejection of the right of return of Palestinian refugees.

However, Netanyahu's need for a broad coalition, given his reduced mandate to lead, could even see him reach across the center to the left, said Dr. Michael Widlanski, a lecturer in political science and communications at Bar Ilan University.

"He could surprise everybody, He could reach across the aisle to the Labor Party and you might see more domestic spending activity and a focus on peace policy in the next term. But I would say there's a 10 to one shot against it," he told DW.

There is also an outside chance that the left bloc could form a coalition capable of governing.

The Jerusalem Post reported that Labor chairwoman Shelly Yacimovich had called on Yesh Atid leader Lapid to join with Labor and form an alternative coalition focused on socio-economic issues. Previous attempts at unity talks between Labor, Yesh Atid and the Tzipi Livni Party failed shortly before the election.

Broad coaliton?

Political analyst Ben Capit said that an alliance between Likud-Beytenu and Yesh Atid would lead to a more stable government than the previous one, in which far right religious parties were not counter-balanced. It would be more capable of addressing domestic issues than the last government, which failed to reach consensus on the army draft and the budget.

"A right-wing and Orthodox government would not last more than a year," he told DW. "The international community wouldn't like it, and the Israeli public wouldn't like it. Netanyahu needs someone further to his left. He has to find a formula that Lapid can live with and the Orthodox can live with."

The Central Elections Committee is expected to release final election results in a week. Meanwhile, coalition negotiations to form the ruling bloc will begin in earnest on Wednesday.

Should Netanyahu be successful, Widlanski said the biggest challenge his government would face would be countering Iran's nuclear programme.

"The US under Obama is not going to engage in any military actions. The question is, will Israel do something on its own, against the wishes of the US? I think that it's a key issue that Israel will have to deal with within the next two years."