Israeli voters did not hand down a verdict yesterday. They have not given a clear mandate to any one politician or political party. They did not enthrone a winner, but they left many losers behind.

The biggest loser - and not for the first time - is the Israeli political system. "The political system is shattered," declared Eitan Haber, the chief editorial writer of Yedioth Ahronoth, Israel's largest circulation newspaper, in today's editions. The paper, attempting to capture the outcome of this indecisive election, features on its front page today photos of the two largest parties' leaders - Tzipi Livni of Kadima and Benjamin Netanyahu of Likud - with a large caption that reads: "I won."

Both claimed victory last night, but neither is a clear winner.

But Livni's victory is short lived. Because in Israel - unlike the U.S. - the winner doesn't take all. In Israel, the winner is not even guaranteed to be the first to attempt forming a government coalition. According to Israeli law, Israel's president assigns that task to the Knesset member that he believes has the best chances to form a coalition. Livni can only form a coalition that includes Netanyahu's Likud. Netanyahu, however, can either form a center-right national unity coalition with Kadima (and other parties) or put together a right wing coalition with several other hawkish and religious parties.

Livni, therefore, may have won the battle, but she lost the war. Most political analysts believe that President Shimon Peres will assign Netanyahu with the task of forming the next government coalition. Netanyahu can easily construct a bloc of more than 61 Knesset members - more than half - to obstruct any attempts by Livni to form a coalition.

And Likud has not said its last word. This morning's tally is not yet final. It does not include the Israeli soldiers' votes. Young soldiers usually support right wing parties and are likely to grant Likud and/or its nationalist partner Israel Beitenu an extra Knesset seat.

But Likud cannot regard itself a real winner either, with less than a quarter of the Israeli parliament's seats and with expectations for a much more decisive victory.

Big losers last night were Israel's traditional Zionist left wing parties. The Labor Party received only 13 Knesset seats and Meretz only three.

The election results are bad news for the region's security and stability. They are very bad news for the Obama administration, which seems determined to push for Israeli-Palestinian and Israeli-Arab peace.

Netanyahu has never been a supporter of the two-state solution. His vision is of an "economic peace" between Israel and the Palestinians in the West Bank. Practically, that means improving the living conditions of the Palestinians as an alternative to trying to accommodate their national aspirations for independence and sovereignty. For the Palestinians, the Arab world, the U.S. government and the international community, that is a non-starter.

Netanyahu's rejectionist approach pits the future Israeli government against the Obama administration and sends a belligerent message to the Palestinians and to the Arab world.

The possible inclusion of Avigdor Lieberman's ultra-nationalist, racist Israel Beitenu Party in the future coalition will further provoke and antagonize the Arab world. The Obama administration will not easily find the Israeli ally that it so much needs to push its new regional policy.