Old hands talk of a Middle Eastern version of Murphy’s law: what can go wrong, does – and usually at the worst possible moment. Tzipi Livni’s failure to form a new coalition led by her Kadima party shows it is at work again.

Confirmation of early elections in Israel follows several developments that had generated cautious optimism: one is the likelihood that Barack Obama will be the next US president and will make good on his pledge to prioritise talks to resolve the world’s most intractable conflict.

Another is renewed interest in the 2002 Arab peace initiative that offers Israel normal relations with all Arab states if – and that remains a very big “if” – it can reach a just settlement with the Palestinians.

The third positive element has been the repeated readiness of Syria to pursue negotiations with Israel over the Golan Heights.

The reason why Livni’s failure casts such a dark cloud is that polls consistently show the frontrunner in the election is Binyamin “Bibi” Netanyahu, leader of the rightwing Likud opposition.

Netanyahu, who like Livni would have to form a coalition with other parties, does not believe in the sort of peace with the Palestinians that Kadima and its Labour party ally are prepared, in principle at least, to agree to.

The Likud will resist any re-partition of Jerusalem, a key issue for Palestinians. Netanyahu opposed the 2005 withdrawal from the Gaza Strip and calls for economic development for the Palestinian Authority before negotiations over territory. Ideologically, the Likud is close to the thousands of Israeli settlers who would have to be evacuated if a land-for-peace deal with the Palestinians could be cobbled together.

Netanyahu’s approach, with his emphasis on fighting “terror”, contrasts with the swelling chorus of mainstream Arab and Israeli voices warning that time for a two-state solution is running out. Indeed, many believe it has already gone.

But Israel’s tangled internal politics are not the only problem. The Palestinian president, Mahmoud Abbas, is also in a desperately weak position.

Hamas warns it will cease recognition of Abbas as president after next January, when his term is due to end. Abbas does not want new elections until 2010. Egypt is trying to broker a compromise between the factions, but hopes of success are slim.

A Palestinian spokesman says Israel’s turbulent domestic politics are its internal affair, and insists the PA is committed to negotiations with whoever is in charge. But no one doubts that a focus on elections – whatever the outcome – is bad news for an already near-moribund peace process.

As the Hamas spokesman Sami Abu Zuhri said from Gaza City on Sunday: “The call for early elections and Livni’s failure to form a coalition government is a slap in the face to those who still dream of negotiations.”—Dawn/Guardian News Service