Aluf Benn argues in Haaretz that the upset in Massachusetts is a victory for Israel's prime minister:
Over the past nine months, Netanyahu has managed to curb pressure from Obama, who enjoys a Democratic majority in both houses of Congress. Now, however, Obama will be more dependent on the support of his Republican rivals, the supporters and friends of Netanyahu.
No Israeli politician matches his steps to the political goings-on in the U.S. as much as Netanyahu. He dragged out negotiations over the settlement freeze and then decided it would last for 10 months and end in September - just in time for U.S. Congressional elections in which Democrats are expected to suffer heavy losses. [...]
Proponents of the peace process will view this as a missed opportunity for Obama, who spent his first year in office on fruitless diplomatic moves that failed to restart talks between Israel and the Palestinians. From now on, it will be harder for Obama. Congressional support is essential to the political process and in the current political atmosphere in the U.S. - in which the parties are especially polarized - Netanyahu can rely on Republican support to thwart pressure on Israel.
I'm don't quite buy the premise of this. It's been pretty clear for the last year that the Obama administration doesn't have a whole lot of leverage over Netanyahu with a Democratic supermajority. The direct effect of losing one Senate vote is going to be pretty negligible.
That said, if Stephen Walt is right and the administration will back away from its ambitious agenda and focus on fewer problems in its second year, perennial issues like the Israel-Palestine conflict are likely to take a back-seat to more immediate national security challenges.