Israel captured east Jerusalem in the 1967 Mideast war and immediately annexed it. The Palestinians want that sector of the city for a future capital, but Netanyahu says Israel won't share sovereignty over the city at the heart of the Israeli-Palestinian conflict.
Some Israelis warn that the continued occupation of millions of disenfranchised Palestinians will turn Israel into an apartheid-like state where a Jewish minority will ultimately rule over an Arab majority.
Yet the conflict with the Palestinians, long a dominant issue in Israeli politics, has barely registered as a campaign issue. Many Israelis have despaired of the prospect of making peace, believing Israel's best possible offers have been made and spurned, sometimes violently. Many are also disillusioned with the bitter experience of Israel's unilateral pullout from the Gaza Strip in 2005, which led to years of attacks from militants there.
The country's center-left opposition, which rallied around the issue for decades, is badly splintered and has failed to produce a compelling alternative leader. The Labor Party, traditionally the dominant standard-bearer for peacemaking, is now more focused on the average Israeli's frustration at having to struggle to make ends meet.
Prospects for peacemaking would not necessarily be improved even if Netanyahu, in his desire to establish a broad, stable government, reaches across the aisle to co-opt lawmakers interested in clinching an accord. Two moderate partners had joined his current government but ultimately bolted, in part because they didn't think he was serious about making peace.
Talks stalled before he was elected four years ago and never revived in earnest, largely because of conflicts over continued Israeli settlement construction.
Palestinians say the continued construction is a sign Netanyahu is not approaching peacemaking in good faith. Netanyahu rejects their calls for a settlement construction freeze and notes that a 10-month construction slowdown Israel imposed earlier in his term did not bring the Palestinians back to the negotiating table until just weeks before it expired.
Palestinians also fear Netanyahu's ambitious plans for settlement construction could kill their dreams of establishing an independent state in the West Bank, east Jerusalem and Gaza Strip, territories Israel captured in 1967 and still controls to varying degrees.
Their hope is that President Barack Obama, emboldened by his own re-election, will pressure Netanyahu to return to negotiations on their terms. But it is equally possible Obama won't risk squandering political capital on the peace process unless he is convinced Israel is willing to make concessions that Netanyahu has not yet signaled he is ready to make.
Associated Press writer Diaa Hadid contributed to this report.
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