Relations could be tested as soon as this month when the Palestinians are expected to ask the U.N. General Assembly to grant them upgraded "nonmember state" status. The Palestinians are seeking broader international backing for their independence in the absence of peace talks.
Israel staunchly opposes the bid, saying differences can only be resolved through negotiations. While the U.S. also opposes the Palestinian initiative, Obama may push Israel to make some concessions to the Palestinians in order to halt the bid and return to negotiations.
"We hope that President Obama's second term will be a term for peace, stability and democracy for the region, during which we will witness the implementation of the two-state solution, the end of Israeli occupation and the establishment of a Palestinian state," Palestinian negotiator Saeb Erekat said.
The Obama victory could also play a role in the Israeli election campaign.
Eytan Gilboa, a political scientist at Bar-Ilan University, said Obama could hypothetically side against Netanyahu in the Israeli campaign by signaling support for opposition leaders, though he said Obama would be "ill advised" to do so. More likely, he said opposition leaders would try to make the rocky relationship with the U.S. a key issue during the campaign.
Gilboa said the Obama reaction might even draw heavyweight opponents like former prime minister Ehud Olmert back into the race.
In a speech to American Jewish leaders in New York on Wednesday, Olmert, in a possible prelude to a political return, accused Netanyahu of damaging relations with the U.S. "Following what Netanyahu did in the last few months, raises the question whether or not our prime minister has a friend in the White House," Olmert said, accordingly to a statement from his aide.
"I am not sure of that, and it could be very significant for us at a critical time," he said. "To my great distress, Netanyahu has turned Israel from an issue that is above all dispute in the American campaign to an issue at the heart of the debate."
The biggest challenge for U.S.-Israeli relations could be Iran. In his speech to the United Nations General Assembly, Netanyahu said the window to attack Iran was quickly closing, and the world would have to act by next summer at the latest. With Obama expected to step up his diplomatic efforts, perhaps even through direct talks with Iran, tensions could emerge if Netanyahu is re-elected.
Aaron David Miller, a former Mideast negotiator under Republican and Democratic presidents, said he did not think Obama "will go to war" with Netanyahu. But he said he did not think the personal relationship will improve unless the men are "forced by necessity" to cooperate, perhaps by resolving the Iran issue.
"In general, you have a relationship that doesn't have a solid foundation. There's great distrust," he said. "But regardless of a lack of trust, in a way, the relationship is too big to fail."
Associated Press writers Lauren E. Bohn and Ian Deitch contributed to this report.
Federman can be followed at www.twitter.com/joseffederman .
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.