The embattled Netanyahu had been looking for a decisive victory in Monday's vote, and initial exit polls had indicated his Likud party and smaller religious and nationalist allies had captured 60 seats, just one short of a majority required to form a new government. Netanyahu triumphantly declared a “huge victory.”
In a video statement, Netanyahu continued to claim victory on Thursday.
“The Likud and the right won the election in a knockout," he said. He accused his opponents of trying to "steal the decision from the masses of Israeli citizens who gave the Likud under my leadership a crushing victory.”
While Netanyahu's opponents control a majority of seats, they are deeply divided, with a hard-line nationalist party and the predominantly Arab Joint List among them. The Joint List captured 15 seats, making it the third-largest party in parliament — its best performance ever.
Those divisions could make it difficult for Blue and White's leader, former military chief Benny Gantz, to establish an alternative coalition. If neither he nor Netanyahu can form a government, the country would head to an unprecedented fourth straight election.
Monday's election was the country's third in less than a year. Previous elections in April and September also ended in deadlock.
Although Netanyahu's Likud had a much better performance than in September, the final results are nonetheless a disappointment for Netanyahu.
The long-serving Israeli leader is scheduled to go on trial March 17 on charges of fraud, breach of trust and accepting bribes. He is accused of accepting expensive gifts from wealthy friends and offering favors to powerful media moguls in exchange for positive press coverage. Netanyahu has denied any wrongdoing.
Netanyahu is desperate to remain in office. Israeli law does not require the prime minister to resign if charged with a crime, and Netanyahu can use the powerful post to rally public support and lash out at what he says is an unfair legal system and hostile media.
The Supreme Court is expected to soon examine the question of whether an indicted politician is permitted to form a new government. If it rules Netanyahu ineligible that could spark a constitutional crisis.
Opposition lawmakers have also begun discussing possible legislation that would prohibit an indicted lawmaker from forming a coalition, or that would establish term limits for the prime minister. Netanyahu is seeking a fourth consecutive term.
The most straightforward path out of the deadlock would be for Likud and Blue and White to agree to a power-sharing unity government.
But Gantz has refused to sit in a government led by Netanyahu while he is on trial, while Netanyahu insists on remaining in office as leader of a unity government.
Avigdor Lieberman, a maverick politician who refused to endorse either candidate after September's vote, is reportedly expected to come out in favor of Gantz. But Lieberman has hostile relations with the Joint List, leaving it doubtful that Gantz can form a government with Netanyahu's opponents.
The election commission said its results were completed, but not official. It said several polling stations were being investigated for possible irregularities and that results will not be official until they are delivered to the country's president on March 10.
After that, President Reuven Rivlin will begin a round of consultations with the eight parties elected to parliament before choosing a candidate to try to form a coalition.
The prime minister-designate is usually the leader of the largest party, in this case Netanyahu. But Rivlin's decision has been greatly complicated by the parliamentary deadlock and legal questions facing Netanyahu.