Avigdor Lieberman, leader of the far right, yet very secular, Yisrael Beitneu party, has cast his lot with Binyamin Netanyahu and Likud. This puts Likud in the driver's seat to form the next government of Israel. Kadima, having won the popular vote and the most seats of any single party in the Knesset, has stated unequivocally that they will not participate in any coalition in which their leader, Tzipi Livni, is not is not Prime Minister.
Likud and Yisrael Beitneu together have 42 seats, 19 short of the 61 needed for a coalition. I suppose if there is good news, the orthodox Sephardic party, known as Shas, wants nothing to do with Yisrael Beitneu. There is no word on any potential Kadima coalition, which would likely need both Labor and Shas on board to form a government. The key to lasting peace in the Middle East is resolving the Israel/Palestinian issue. None of these developments bode well for moving forward.