Benjamin Netanyahu has lost his status as the favorite to continue as prime minister of Israel. Recent data from Polymarket indicates that Gadi Eizenkot, the former Chief of Staff of the Israel Defense Forces, now holds a slight edge with a probability of approximately 34%, while Netanyahu's chances stand at about 32%. Although the gap is small, it marks a significant shift for a politician who has dominated the Israeli political landscape for nearly two decades.
What factors are influencing this change? The primary cause appears to be a recent tentative framework for a US-Iran deal announced in mid-June. Such diplomatic efforts, typically favorable in global politics, present a challenge for Netanyahu, whose political reputation is significantly tied to a strong stance against Iran. The perception of a stabilizing security environment diminishes the urgency for voters to support an incumbent focused on security issues.
Polling conducted in early June already pointed to the potential for an anti-Netanyahu coalition to gain a majority in the Knesset. This trend seems to be accelerating as the proposed Iran deal gives voters less incentive to continue backing a security-first approach under Netanyahu.
How did Netanyahu’s coalition face instability? His governing coalition faced a significant collapse driven by disagreements over military exemptions for Haredi, or ultra-Orthodox, individuals. This has historically been a contentious issue in Israeli politics and culminated in the exit of ultra-Orthodox parties from the coalition. Following this departure, the government is set to hold new elections by October 27, 2026.
Amidst this political turmoil, Eizenkot has emerged as the consensus candidate for those opposing Netanyahu. Current surveys suggest that he is viewed favorably by voters looking for alternatives to the current regime.
What does the prediction market reveal about the competition? The Polymarket prediction market has engaged more than $16.8 million in trades related to the Israeli prime minister race. It's important to note that this contest is not merely a two-candidate dilemma; Naftali Bennett, who served briefly as prime minister, is also in the running with a probability of 22%. Veteran political figure Avigdor Lieberman trails with a mere 4% chance.
As the political landscape in Israel shifts, it's essential for investors to watch these developments closely. Changes in leadership can have significant implications for both domestic and foreign policy, which can ultimately impact market performance in the region.