ISRAEL's election campaign was waged over a very clear issue - how to deal with the Palestinians of the West Bank and Gaza - but the result is anything but clear. Voters split between the Labor and Likud blocs, and threw a larger than expected share of their support to small religious parties. Likud, under Prime Minister Yitzhak Shamir, has the best chance of forming a ruling coalition. Shimon Peres, Labor's leader, hasn't conceded defeat, but his party is unlikely to find enough common ground with the religious factions to shape a government.
An arduous process of coalition-building lies ahead. But already, worried observers are saying the electoral result has darkened prospects for peace in the Mideast. The stakes are so great, however, that it would be a mistake to yield to pessimism.
Certainly a Likud-led government in Israel would demand a new approach to peace. But it was the Likud, under Menachem Begin, that took part in the only past breakthrough for peace. For his part, Mr. Shamir stands firm against a territory-for-peace formula. He rejects the idea of an international conference, which is a centerpiece of the current American peace plan.
What Shamir and his colleagues do support is a return to the Camp David process, particularly its provisions for autonomy for the West Bank and Gaza, with the final status of the territories to be decided, ultimately, through direct negotiations between Israel and its neighbors in the region.
Many feel the Camp David process is dead. It bogged down years ago over such sticky issues as what was meant by ``autonomy.'' Negotiations for a compromise on this lapsed under the Reagan administration. With a new Israeli government determined to revive Camp David, they might be restarted.
But before progress on any peace process can be made, Israel has to deal with the Palestinian intifadah, or uprising. It has gone on for nearly a year, despite Israeli repression.
Shamir's only answer is even greater use of force. Likud's get-tougher policy rests on the assumption that the uprising is the work of relatively few Palestinians who think they can pressure Israel into leaving the territories. When these few realize this will never happen, the Likud thinking goes, things will settle down and the bigger issue of the political status of the territories can be resolved.
But those assumptions could well be wrong. The biggest issue may in fact be the grievances and frustrations that drive the intifadah - which have deep social, economic, and political roots. A crackdown may only send those roots further into the sands of the West Bank and Gaza.
The path toward a Mideast peace appears as steep as ever. A terrorist act here and a brutal reprisal there too easily obscure the goal. But peace remains the only logical, desirable aim for all peoples in the region, and the process of negotiation and compromise that brings it nearer has to continue, no matter who's in power.