"I am not optimistic about the next Israeli prime minister," said Osman al-Natsheh, a shop owner in Hebron. "They have different faces but the same policy. Livni or Netanyahu, who would think of giving Palestinians their land back?"
Office employee Ali Zaidan of Ramallah, the seat of Palestinian Authority in the West Bank, said, "Israelis voted for the right and against peace. We will not see progress in the peace process in the coming years."
Mahmoud Abbas, the Palestinian Authority president, appeared determined to maintain dialogue on the tattered peace process with Israel's next prime minister.
"I'll talk with whatever government emerges in Israel," Abbas was quoted as telling Italy's La Repubblica. "The ascent of the Israeli right does not worry us."
"Take for example, Netanyahu. In the past, he took important steps, he signed two accords with us."
The decision is in the hands of President Shimon Peres, who reportedly has no choice but to tap Netanyahu if the majority rightist parties all back him. In the coming days he will talk with the leaders of all the factions to hear their recommendations. Most of them are likely to tell him that Netanyahu is their man.
Some Israelis are hoping for a compromise. Perhaps Livni will be willing to join Netanyahu in a national unity government. That would certainly give greater credibility to the next government, but it is hard to see how it would be any better qualified to make peace with either the Palestinians or the Syrians.
The political stalemate will not please anxious observers in the White House and U.S. State Department, keen as they are on kick-starting a proper peace process. No matter what extravagant deals may be cut here in the next few weeks, it is hard to imagine a strong peace-seeking government emerging.
"The Obama administration is going to inherit the worst of both worlds," former U.S. mediator Aaron David Miller said.
"They have already inherited a dysfunctional Palestinian house, made worse by Gaza, and now what they are inheriting is a dysfunctional Israeli house."
The Associated Press contributed to this report