After Obama's inauguration, White House spokesman Jay Carney repeated the president’s policy. “What needs to take place are direct negotiations between the two parties that address the final-status issues and that result in a two-state solution," he said.

But some Palestinians in the West Bank are skeptical that a new Israeli government will be a positive development.

Palestinian Foreign Minister Riad Malki said, “While the Palestinian leadership has reaffirmed its immediate readiness to engage in negotiations on the basis of clear parameters, Israel, however, has instead persisted in its path of occupation, conflict and fear mongering.”

If there is a centrist government, Mr. Netanyahu may be under less pressure for a military strike against Iran’s nuclear facilities.

The Obama administration is hoping a combination of sanctions and diplomacy will avert an armed confrontation.

“The Israelis are willing to let the United States play this out, play Obama’s strategy out, to the very end and see whether the Obama strategy succeeds in convincing Iran to negotiate an end to its military nuclear program," said Robert Satloff

It's likely to take weeks to form a new coalition government, and Yair Lapid is expected to be right in the middle of the negotiations.