Israel Faces Political Uncertainty as Election Results Leave Both Main Blocs Without Majority

Israel's election results show Prime Minister Benjamin Netanyahu's right-wing bloc projected to win 54 seats, while the opposition bloc led by Gadi Eisenkot is expected to secure 47 seats, leaving neither group with a parliamentary majority. Partial results from Israel's Central Elections Committee showed Netanyahu's party taking 20.8 percent of counted votes and Eisenkot's party taking 16.4 percent, with polls indicating Arab-led parties earned about 18 seats. Voter turnout reached 77.7 percent, the highest in a Knesset election in 27 years.

Market Impact

Financial markets reacted swiftly to the unclear outcome as Israeli assets sold off. The Israeli shekel dropped 2 percent against the U.S. dollar, and the Tel Aviv 35 stock index fell 2.3 percent. Government bonds also faced pressure, with the 2-year bond yield rising by 6 basis points and the benchmark 10-year yield increasing by 8 basis points.

Reactions

Gadi Eisenkot, a former military chief of staff, claimed early victory and stated that preliminary results showed a complete lack of confidence in Netanyahu's government. Meanwhile, Arab-party leaders signaled their intent to influence the outcome, with Ra'am leader Mansour Abbas declaring that their vote will change the government.

Context

Forming a government in Israel typically requires building a coalition because single parties rarely win an outright majority in the 120-seat Knesset. The president asks a leader who can assemble a 61-seat majority to form a government, and ongoing talks will likely focus on securing support from smaller factions to break the deadlock.