His right-wing Likud-Beitenu bloc¹ will have 31 seats in parliament - a sharp drop from 42, exit polls suggest.

 

In a major surprise, the centrist Yesh Atid (There is a Future) party came second with a predicted 18-19 seats, with Labour next on 17.

 

Analysts² now predict weeks of political horse-trading to form a new cabinet.

 

They say that there is even a possibility that Mr Netanyahu's alliance would end up being in opposition³.

 

Although the Likud-Beitenu alliance is the largest seat-winner, the split of right and left political blocs⁴ is a dead heat at 60-60 in the 120-member Knesset, the Israeli Central Elections Committee website showed, with 99.5% of votes counted.

 

Thirty-two parties were competing under a system of proportional representation. Parties must win at least 2% of the total vote to secure seats.

 

Full election results are expected on Wednesday, and the official ones will be announced on 30 January.

 

Speaking shortly after the voting ended on Tuesday evening, Mr Netanyahu thanked the voters "for the opportunity to lead the state of Israel for the third time".

 

In an apparent reference to his electoral setback⁵, the prime minister promised to reach out to "many partners" to form a wide coalition⁶. 

 

"Tomorrow we start anew," he said.

 

He also said that preventing Iran from obtaining nuclear weapons remained the government's first challenge.

 

Other top priorities, he added, would be stabilising the economy, striving for peace in the region, more egalitarian military and civilian⁷ services and reducing the cost of living.

 

In a brief speech, Yisrael Beitenu leader Avigdor Lieberman said: "I'm happy that our two main missions were achieved. We have ensured a continuity in the rule of the national camp and the continued leadership of Prime Minister Netanyahu."

 

Mr Netanyahu is now widely expected to seek an alliance with a new nationalist party, Habayit Hayehudi (Jewish Home), which is projected to have 12 seats. 

 

The party - led by Mr Netanyahu's former chief-of-staff Naftali Bennett - has been recently challenging Likud-Beitenu's dominance on the right.

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