(Bloomberg) -- Israel’s defense minister resigned and pulled his faction out of the government Wednesday, leaving Prime Minister Benjamin Netanyahu’s coalition with a precarious parliamentary majority and threatening its survival. Markets fell.

Avigdor Liberman, who has urged the government to strike a harsh blow against Gaza’s Hamas rulers, quit after the security cabinet on Tuesday agreed to a truce halting a two-day flareup in fighting. He also called for early elections.

The cease-fire, and attempts to reach a long-term truce, are “a capitulation to terrorism,” Liberman said at a news conference. “There’s no other way to look at it.” He also faulted Netanyahu’s decision to let Qatar transfer $15 million to Gaza to ease the dire humanitarian situation there, saying the money would support families of militants who attacked Israel.

The departure of Liberman’s Yisrael Beitenu party from the coalition leaves Netanyahu with the narrowest possible majority, 61 of 120 parliamentary seats. The eight-seat Jewish Home party will also pull out if its chairman Naftali Bennett -- a Netanyahu rival who’s also accused the government of being soft on Gaza -- doesn’t get the defense portfolio, senior party officials said.

Double Duty

A spokesman for Netanyahu’s Likud party, Yonatan Ulrich, said the prime minister plans to take over the defense portfolio for the immediate future.

Netanyahu governed with a 61-seat coalition before Liberman joined in May 2016. Still, while smaller governments usually last longer than larger ones, the prime minister faces a “special situation,” with Bennett insisting on the Defense Ministry and Likud rebels breaking party discipline on parliamentary votes, said Abraham Diskin, professor emeritus of political science at the Hebrew University of Jerusalem.

“I would say the scenario of early elections is closer than ever before,” Diskin said. “We could have early elections in a few months, maybe February.” Elections are currently scheduled for November 2019. He predicted the next vote would produce a similar breakdown along the right-left divide.

Effective Friday

Netanyahu had no immediate comment on the political turmoil. Liberman has had a volatile history with Netanyahu, joining forces then bolting several times in the two-plus decades during which their political careers have crossed.

The shekel was down 0.12 percent against the dollar at 2:48 p.m. in Tel Aviv. Israel’s main stock gauge, the TA-35, extended losses to as much as 0.9 percent, the lowest level of Wednesday’s session, before paring them to 0.6 percent.

Liberman’s resignation, which is due to take effect on Friday, follows months of speculation about whether the prime minister will dissolve the government and call early elections.

Corruption Probe

A two-year-old corruption probe against Netanyahu is inching toward conclusion, with Attorney General Avihai Mandelblit due to decide whether to indict him in three separate cases. Some commentators have reasoned that if the prime minister goes to early elections and wins big, it would be harder for Mandelblit to take action against him.

Netanyahu has denied any wrongdoing and has contended he’s the victim of a leftist cabal out to bring down his conservative government. Polls have shown he’d win an early election, though he is now facing heavy criticism from some residents of southern Israel, who are furious he agreed to a truce after they were bombarded by Gaza rocket fire this week.

In Gaza, Hamas celebrated Liberman’s resignation. “Liberman’s resignation is a recognition of defeat, failure and helplessness in facing the Palestinian resistance,” spokesman Sami Abu Zuhri said. “Gaza succeeded in touching off a political earthquake in the occupation’s sphere.”

(Updates with analyst comment from seventh paragraph.)

To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Amy Teibel

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