Far-right MK Avi Maoz quits coalition, leaving Netanyahu without Knesset majority

Far-right MK Avi Maoz's withdrawal has left Prime Minister Benjamin Netanyahu's coalition with a minority of 60 out of 120 Knesset seats, following previous departures by ultra-Orthodox parties over issues like military service exemptions. While this development significantly complicates the government's ability to pass legislation, it does not immediately imperil Netanyahu's tenure, as the dissenting parties are not currently seeking early elections or a no-confidence vote, though they will assess bills on a case-by-case basis.

Analysis

Prime Minister Netanyahu's coalition has lost its parliamentary majority, now controlling only 60 of the 120 Knesset seats following the withdrawal of far-right MK Avi Maoz. This development compounds existing instability after the United Torah Judaism party also quit the coalition and the Shas party withdrew its ministers, both in protest over the government's failure to pass a military service exemption bill for yeshiva students. While this shift to a minority government severely compromises its ability to pass new legislation—as a 60-60 vote tie results in failure—it does not signal an imminent collapse. Key dissenting parties are reportedly not seeking to dissolve the Knesset or support a no-confidence vote at this time. The immediate consequence is a state of legislative paralysis, where the government's functioning, already described as 'not very good,' is further impaired. The government will likely survive, but its capacity to enact policy, particularly on contentious issues like the budget or religious funding, is now highly uncertain, with former coalition partners expected to evaluate each bill on a case-by-case basis.

Key Decisions for Investors

• Investors should anticipate heightened legislative and policy uncertainty in Israel, as the minority government will struggle to pass any new laws, including potentially critical fiscal or economic reforms.
• Monitor the voting patterns of the dissenting parties (Maoz, UTJ, Shas) on key bills, as their ad-hoc support will be crucial for the government's operational capacity and survival.
• Consider increasing the political risk premium for Israeli assets, as the current governmental instability, while not triggering an immediate collapse, elevates the medium-term probability of policy gridlock or snap elections.