JERUSALEM
Benjamin Netanyahu and Gadi Eisenkot both claimed the right to form Israel's next government following a deadlocked national election that left neither the incumbent's Likud bloc nor the opposition National Unity alliance with a majority in the 120-seat Knesset.
Netanyahu, leading the Likud-led right-wing and religious alliance, argued his bloc holds the largest seat count and therefore the mandate to govern. Eisenkot countered that Netanyahu lacks a viable path to a stable coalition and called instead for a broad unity government to bridge deep political divisions.
Israeli President Isaac Herzog will begin consultations with party leaders to identify which candidate has the best chance of forming a coalition. The chosen candidate will have 28 days to assemble a government. Failure triggers another election.
The political vacuum creates measurable risk for fixed-income markets. Israeli sovereign spreads are likely to widen as investors demand higher yields to compensate for policy uncertainty and delayed fiscal decisions. Budget approvals, infrastructure spending and regulatory reforms will stall without stable government direction. The Bank of Israel's monetary policy credibility will suffer without a clear fiscal outlook from the executive branch.
The shekel faces downward pressure against the U.S. dollar and other major currencies as international investors reassess regional exposure. Credit spreads on Israeli corporate debt relative to sovereign bonds will likely compress as duration risk climbs. Bondholders face immediate mark-to-market losses if yields rise in response to the political impasse.
