THE first reaction of Binyamin Netanyahu, Israel's prime minister, when he heard that Republicans had taken over America's Congress, may have been a whoop of delight. His closest American friends are Republican. There is a widespread feeling in Jerusalem that Barack Obama lacks the gut sympathy for Israel that his immediate predecessors possessed. The American president, some Israeli hawks may be thinking, will now have to get off Israel's pecked back. As for the Palestinians and their Arab friends, they almost universally fear that Israel has seen off Mr Obama and that he may be tempted to deflect his attention elsewhere, especially at home. In other words, the prospects for a peace deal, already dim, seem to have faded even further.

Yet this additional gloom is unjustified even though the diplomatic mood is bleak. Direct negotiations between Israelis and Palestinians, which reopened in September and lasted barely a month, have been postponed for just as long. Mr Netanyahu is refusing, after a ten-month freeze, to stop Israelis building settlements on the West Bank, the core of a Palestinian state. The Palestinians say they will not return to the table as long as construction continues.

But the stalemate can still be broken, even if the chance of an early and durable deal remains remote. The main reason for this guarded optimism is that many seasoned watchers in Jerusalem expect Mr Netanyahu to resume the freeze on settlement building, excluding, as before, the area on the rim of East Jerusalem, which Palestinians foresee as their future capital. It could last at least another few months.

This might enrage some bits of his ruling coalition; were Mr Netanyahu later to make concessions over borders or the sharing of Jerusalem, his government might collapse. Meanwhile Mr Netanyahu's partner on the left of the coalition, Ehud Barak, the defence minister, who heads the Labour party, has been facing demands from his colleagues that his lot should also secede from the coalition if negotiations with the Palestinians have not resumed by the end of the year. “I smell elections in the air already,” says a minister, predicting a poll next year. Mr Obama's people have long hoped that a centrist Israeli party, Kadima, led by Tzipi Livni, would join a reshaped and more peace-minded coalition less vulnerable to the demands of the right.

In any event, whatever Mr Obama's relations with a new Congress, his American mediators are still casting around for ways to break the impasse. A breakthrough on borders is still the big hope. If the two sides could agree to adjustments along the 1967 boundary, with land swaps giving equal territory to the Palestinians while leaving three or four of the biggest settlement blocks within Israel's bulged-out boundary, then the argument over a settlement freeze could probably be ended—and the negotiators could move on to final issues.

The other tricky one that has come to the fore is Mr Netanyahu's insistence that the Palestinians should acknowledge Israel as a Jewish state, perhaps as a quid quo pro for a further freeze. The Palestinians oppose this because, in their view, it would pre-empt their claim to a “right of return” of refugees, even though, in a final deal, they know that only a symbolic number would be allowed back to their homes in what is widely accepted as Israel proper. The Palestinians also fear that such an acknowledgment might relegate their Arab-Israeli brethren in Israel as second-class citizens. In any event, outside mediators are fairly confident that a formula can be found to accept the Jewish character of Israel with crucial addenda to enshrine the rights of Israel's non-Jewish citizens.

By contrast, the Palestinians, led by their embattled president, Mahmoud Abbas, sensing that the impasse may persist as long as Mr Netanyahu seems loth to dump his coalition's right-wing partners, have begun to push harder for the UN to recognise a Palestinian state within the 1967 line, even while Israel still militarily occupies the area. Some European governments, too, are toying with the idea of raising Palestine's status at the UN from that of observer to full member. Israel's government is confident, probably rightly, that the United States would veto such a move. But the notion of it is gaining ground, making some Israelis queasy.

In sum, it is not yet clear whether Mr Obama will tackle the Middle East conundrum with renewed vigour. There is no big reason why not, and no solid evidence that his perceived lack of love for Israel recently lost him many votes at home. But Palestinian gloom would deepen if, as has been rumoured, George Mitchell, whom the Palestinians respect, bows out in frustration as Mr Obama's chief envoy, while Dennis Ross, widely perceived as more partial to Israel, takes up a more influential role. If the logjam persists, calls for Mr Obama to present the Israelis, perhaps on their own turf, with his own detailed peace plan, will get louder.

Mr Netanyahu, not Mr Obama, is the real enigma. His record suggests a reluctance to make the compromises that could bring a deal. But neither his American nor his Palestinian nor even his Israeli interlocutors find him easy to interpret. No one is sure whether, from Israel's current perceived position of strength, he genuinely wants a lasting peace that would give the Palestinians a proper state. He leaves room for manoeuvre. He is flexible to a point of opportunism. Some of his age-old detractors think that he, like other Israeli hawks before him, could yet surprise everyone with a bid for a place in peacemaking history. But there is no sign of that yet.