Voter concerns about security helped right win election
The right's strong showing was fueled by voters' concerns over security at a time when Palestinian militants continue to strike from Gaza and Iran plows ahead with plans to develop its nuclear capabilities.
In last week's election, Netanyahu's Likud Party came in second - just one parliamentary seat behind Livni's Kadima. The race was too close to call. The candidate whose party has a better chance of forming a coalition government with smaller parties is usually the one picked to be Prime Minister.
That decision will be made by President Peres. He is expected to announce his pick soon.
Mr. Peres began consultations on Wednesday after receiving official, final election results. His meetings continued into Thursday.
"It is now the time to open a new chapter because there is a new chapter in world politics. And I wouldn't be prejudiced about any elected Israeli," he said. "Whoever was elected by the people will not be free from facing the call of the time."
Mr. Netanyahu campaigned on promises to boost security and improve Israel's economy. He has pledged to focus less on negotiations with the Palestinians and concentrate more on shoring up the Palestinian economy. He has also called for toppling Hamas.
Lieberman ran on a platform that calls for handing over control of Arab communities in Israel to the Palestinian authority in exchange for Jewish settlements in the West Bank, a measure that would effectively exclude many Arabs from Israel. He also wants Arab Israelis to be required to pledge loyalty to the Jewish State.
Israeli turn to right may cause problems with US relations
Political analysts say Israel's turn to the right may put it on a collision course with the new U.S. administration, which is still in the process of formulating its Middle East policy.
A number of U.S. officials are planning visits to the region in the coming weeks, including Secretary of State Hillary Clinton.
On Thursday, U.S. congressmen Brian Baird and Keith Ellison visited the Gaza Strip to get a look at U.N. operations following Israel's 22-day offensive on militants. Reports said Senator John Kerry, chairman of the Senate Foreign Relations committee, was also due to be in Gaza.
They planned no meetings with Hamas.
Visits by U.S. government officials to Gaza are rare. The lawmakers went into the Strip despite a general security warning from the U.S. Department of State that urges Americans to avoid all travel to the Gaza Strip.