After a tense night of seesawing vote counts, opposition leader Benjamin Netanyahu appeared to have edged out Prime Minister Shimon Peres in an election that exposed the deep rift among Israelis on how to proceed with Mideast peace talks.
With 99.9 percent of ballots counted by Thursday morning, Netanyahu led with 50.3 percent to Peres' 49.7 percent in Wednesday's election for prime minister - a margin of about 20,000 votes out of an electorate of 3.9 million.But with 154,000 absentee ballots still remaining to be counted, the final outcome was not expected before Friday afternoon at the earliest.
Peres, who advocates greater concessions toward the Arabs than does his rival, still had a theoretical chance for a come-from-behind victory. But Israeli commentators said it looked like Netanyahu would be the country's next leader.
Israelis also voted Wednesday for the 120-member parliament, or Knesset. Both major blocs - Netanyahu's Likud and Peres' Labor Party - lost large chunks of votes to religious and other smaller, special-interest parties.
A Netanyahu government is expected to slow the pace of peacemaking with Palestinians and to retract promises made by Peres, the architect of Mideast peace and a 1994 Nobel Peace Prize laureate.
The leader of the right-wing Likud Party has said he would block the creation of a Palestinian state, build more Jewish settlements in the West Bank, refuse to negotiate any return of Jerusalem to the Arabs and halt a planned Israeli troop withdrawal from the West Bank town of Hebron.
Palestinian leader Yasser Arafat was briefed throughout the night in his headquarters in Gaza City. His officials expressed concern about a Netanyahu victory but said the Likud leader could not reverse what had already been achieved.
"The situation is going to be a bit more complex, but we are not in a panic," said Hanan Ashrawi, a member of the Palestinian legislative council.
Labor representatives watching the vote count at the Central Election Commission demanded spot checks of voters' lists Thursday to make sure they matched the number of ballots cast.
"We are now searching for every vote," said Ronen Tzur, an aide to the chief of Labor's parliament faction, Raanan Cohen.
Cohen said he wanted to know why 143,000 votes for prime minister had been declared invalid, as opposed to only 63,000 for parliament. Labor said there was concern of vote fraud in Jewish settlements and several ultra-Orthodox strongholds.
The tight race will be determined by the absentee ballots cast by soldiers, merchant seamen, diplomats, prisoners and hospital patients. The count could be interrupted by the Jewish sabbath, which lasts from sundown Friday to sundown Saturday.
A Peres victory would require a solid majority among the absentee voters, but the soldiers who make up most of that group traditionally have favored right-wing parties. A defeat would likely spell the end of a political career that spanned five decades and included two stints as prime minister.
Peres watched the results at his home in a Tel Aviv suburb, and then unexpectedly went to Tel Hashomer Hospital to treat a lingering eye infection.
Peres did not appear before supporters and asked his Cabinet ministers to remain silent until final results were released.
Peres, 72, had promised voters an end to a century of Israeli-Arab hostility and final treaties with the Palestinians, Syria and Lebanon. He appeared ready to give up land Israel won in the 1967 Mideast war to achieve his goals.
Netanyahu also remained secluded, even after results showed him ahead.
Supporters of the opposition leader were confident he could bring them both peace and security - a formula that eluded Peres, who was unable to prevent a series of suicide bombings by Islamic militants hoping to wreck the peace agreements.
"Let's hope he has the ability to heal these wounds," said Melvin Polk, a retired physician. "This is a divided country - 50 percent one way and 50 percent the other."
Others feared Netanyahu, 46, would lead the country to more confrontations with the Arabs.
"I want peace and I don't want my children to go and fight the Arabs. I want to live in quiet," said Shlomit Davidov, a 31-year-old goldsmith and mother of two.
Davidov said a Netanyahu victory would mean that Yitzhak Rabin died in vain. Rabin, Peres' predecessor, was assassinated in November by an Israeli extremist opposed to peacemaking.
"I'm ashamed of my nation," she said. "After Rabin's murder, they still seem to think we have to fight against Arabs and not make peace."
Rabin's widow, Leah, said Peres should have made more use of the assassination to win voter sympathies and avoid a Netanyahu victory.
"I looked at where my suitcases are kept, and I feel like packing a suitcase and quickly getting out of here," she told Associated Press Television.
She blamed Netanyahu for inciting the political vitriol that many people believe created the climate for the assassination.
Rabin's assassination traumatized the nation and swung the country behind Peres, his successor. But the prime minister's 16-point lead in polls was wiped out three months ago by the suicide bombings, which reinforced the sense of vulnerability to Arab attacks that many Israelis feel.
"I think that if there was a mistake made on this electoral campaign it was that the horrible murder was not completely used," Leah Rabin said.
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ADDITIONAL INFORMATION
New leader's next job: Form a government
Here is how the Israeli government will be formed after the May 29 elections: For the first time there is a direct election of a prime minister, who must win more than half the votes. He must form a government or arrange a coalition that controls a majority in the 120-member Knesset, or parliament. He has 45 days to win the approval of parliament for his Cabinet. If he does not present his Cabinet to parliament within the alloted time, new elections for prime minister will be held within 60 days. If he presents his Cabinet but fails to win a majority in parliament, new elections for both prime minister and the parliament are held within 60 days. The prime minister-elect can also dissolve parliament by decree if he feels he will be unable to muster a majority for his government. In this case, new elections for parliament and prime minister are held within 60 days. If a prime minister-elect fails to present a Cabinet to parliament within 45 days, is then re-elected in a new vote, and fails one more time to form a government in the alloted time, he cannot run for prime minister a third time.