While election numbers are still coming in, the current analysis is that the pro-Netanyahu bloc of parties would be able to muster at most 59 seats, and the anti-Netanyahu bloc 56 seats. In Israel’s 120-seat Knesset, control of 61 seats is necessary to choose the Prime Minister and decide who heads the government. In a result that defined pre-election polling, a new, more conservative Islamist party — Ra’am — broke off from the other Arab parties and appears to have won 5 seats. That would make Ra’am the kingmaker in deciding which bloc would get to the 61 votes needed to control the government (unless no governing coalition can be formed and yet another national election is required).
This is a familiar story in PR systems, though an unusually dramatic illustration of the point. Parties with small overall support can extract policy concessions and exercise power far above their level of popular support with the leverage they have if they are needed for larger parties to form governing coalitions. Even if the public overwhelmingly rejects certain policies, governments might be required to adopt them to bring in small parties necessary to form a government. The best recent critique of PR systems, for these types of reasons, is the excellent book, Responsible Parties, by Ian Shapiro and Frances Rosenbluth.
The situation in Israel is still fluid. Since Ra’am’s success was not anticipated, it’s unclear whether one, both, or neither of the blocs on the left or right would be willing to go into coalition with Ra’am; what Ra’am’s position on that would be; and what policies Ra’am would insist on to join a governing coalition. The process of attempting to form a coalition might also break down, with Israel forced to hold yet a fifth election to try to form a government — another risk PR systems can generate.