Israel’s currency and stock market dropped sharply on Wednesday as the country’s general election produced no clear winner, leaving Prime Minister Benjamin Netanyahu fighting for his political survival after a high voter turnout.
Partial results with over 66% of ballots counted showed Prime Minister Benjamin Netanyahu’s bloc likely to win 56 seats in the 120-seat Knesset, while challenger Gadi Eisenkot’s bloc was projected to win 48 seats. Arab-led parties, which belong to neither camp, were projected to secure 16 seats. The political situation triggered immediate financial fallout across Israeli markets, with the shekel falling 1% against the U.S. dollar and the Tel Aviv 35 stock index trading 2.7% lower.
Government debt instruments also faced heavy selling pressure as yields climbed across the curve. The yield on two-year government bonds added 6 basis points, the benchmark 10-year yield rose by 4 basis points, and longer-term 30-year bond yields gained 2 basis points.
High Voter Turnout and Early Claims of Victory
The ballot marked the first national vote in Israel following the Oct. 7, 2023 attack and the subsequent conflicts in Gaza, Iran, and Lebanon, functioning effectively as a referendum on Netanyahu’s political hegemony since 2009. Voter turnout reached 77.7% of eligible citizens, the highest in a Knesset election in 27 years, according to the Central Elections Committee. The election drew tens of thousands of citizens flying back to vote.
תוצאות המדגם הראשוניות מצביעות על אי אמון מוחלט בנתניהו וממשלת השבעה באוקטובר, של הרוב הציוני ושל רוב אזרחי ישראל.אם אלו התוצאות הסופיות זהו נצחון לרוב הממלכתי-ציוני בישראל.אפעל באופן מיידי למימוש הכרעת העם, להחלפת ממשלת נתניהו ולהקמת ממשלת גיוס ציונית, בהקדם האפשרי.
Earlier that day, Gadi Eisenkot claimed success and argued that the preliminary numbers — which put his alliance slightly ahead — entitled him to the initial mandate for establishing an administration. “The initial exit poll results indicate a complete lack of confidence in Netanyahu and his October 7 government,” he said in a statement on X.
Exit polls are not the official results, which are published on Nov. 4. Because outright majorities are rare, parties typically form coalitions. The head of state designates a parliament member — typically the political chief best positioned to construct a 61-seat coalition — to form a government. If those attempts fail, another election can be called.
Coalition Mathematics and the Arab Party Factor
The historic Arab-party result is a factor to watch in coalition talks. Ra’am leader Mansour Abbas said that “our vote will change the government.” Ahmad Tibi, who heads the Joint List faction, had previously laid out a strategy to stop Netanyahu from staying in office post-election, as reported by the Jerusalem Post.
Amin Saikal, an adjunct senior fellow at Singapore’s S. Rajaratnam School of International Studies, noted that the pro-Palestinian stance of Arab-led parties aligns them more closely with Eisenkot than with Netanyahu, though neither man has said he would embrace them. “Even if Eisenkot’s alliance wins more seats, it’s less likely to be able to form a governing majority without including Arab and left-wing parties,” said Michael Feller, chief strategist at Geopolitical Strategy. “The next government’s policies on Iran, Palestine and security may otherwise stay the same.”
Avigdor Liberman, who heads Yisrael Beytenu — a party projected to win seven to nine seats and currently allied with Eisenkot in the opposition — declined throughout the campaign to depend on Arab factions.
Earlier on Tuesday, Netanyahu and his far-right coalition partners warned of strong Arab participation in the vote. “If we don’t wake up now, we’ll find ourselves with a government of Mansour Abbas and Ahmed Tibi,” he said, following a string of social media updates drawing attention to lengthy queues at polling booths located in Arab towns.
Stalled Negotiations and Future Deadlines
Supporters praise Netanyahu for guiding the country through wartime challenges and resisting foreign pressures, whereas detractors view his ongoing corruption trial, disputed judicial reform efforts, and management of the Gaza conflict as proofs of his unsuitability for office. Netanyahu faces an International Criminal Court arrest warrant over the Gaza campaign, which he has rejected.
P.R. Kumaraswamy, an emeritus professor of Middle Eastern Studies who specializes in Israeli politics at Jawaharlal Nehru University, anticipates extended coalition talks once final vote tallies are officially released. “It is too early to write him off,” he said of Netanyahu. Having previously benefited from electoral deadlocks that preserved his premiership while rivals failed to meet coalition-building deadlines, Netanyahu secured his status as the nation’s longest-serving prime minister. Israel held five elections between 2019 and 2022. Even if Eisenkot secures a higher seat count, Netanyahu could leverage the coming weeks or months by attempting to delay the establishment of a successor administration, according to Amin Saikal, an adjunct senior fellow at Singapore’s S. Rajaratnam School of International Studies. The prime minister will “fight for his political survival,” Saikal said.
