The warnings from Israeli pundits and foreign observers alike came almost as soon as Israeli President Shimon Peres picked Likud’s Benjamin Netanyahu to form the next Israeli next government.

The message was clear: Don’t forsake the pursuit of Arab-Israeli peace and risk isolating Israel on the world stage.

So when Netanyahu addressed the Knesset at his swearing-in ceremony Tuesday, observers were listening closely for signs of where the new prime minister intends to lead his country.

“Israel always, and today more than ever, strives to reach full peace with the entire Arab and Muslim world,” Netanyahu said. “We do not want to rule the Palestinians.”

At the same time, however, Netanyahu carefully avoided any endorsement of a two-state solution to the Israeli-Palestinian conflict.

The challenges facing Netanyahu’s new government are clear, if formidable: Steward Israel through a crippling global economic crisis; prevent Iran from going nuclear; contain threats to Israel from Hamas along its southern border and from Hezbollah along its northern border.

But as with his statements over the past few months, Netanyahu’s careful articulations in his inaugural address left uncertain where he stands on the most contentious issue in Israel, and between Israel and governments overseas: the pursuit of a two-state peace deal with the Palestinians.

Even Talmudic scrutiny cannot fully elucidate Netanyahu’s ambiguity on this point.

“Under the permanent-status agreement, the Palestinians will have all the authority necessary to rule themselves,” Netanyahu said, at once suggesting that he will pursue Israel-Palestinian peace but indicating through omission that statehood for Palestinians might not be the end result.

A later line — “I say to the Palestinian leadership that if you really want peace, we can achieve peace” — both gives the impression that Netanyahu is willing to make peace, but also leaves the door open for the prime minister to sidestep final-status negotiations if he deems the Palestinian leadership not ready for peace.

Ron Dermer, a senior adviser to Netanyahu who told JTA he will be the new government’s director of communications and policy planning, said Netanyahu’s position vis-a-vis the Palestinians is not so different from that of Israel’s allies.

“The Palestinians should have all the powers necessary for self governance, but not the handful of powers that could endanger Israel’s security,” Dermer said — such as an army, airspace rights, heavy weaponry or treaties with states like Iran. Whether or not such an entity is called a state is an issue of terminology, not ideology, he said.

Now that he has taken office, Netanyahu may not be able to keep up his balancing act — offering nuggets to placate critics on the left and right — for long. But doing so may be crucial to keeping his coalition intact.

Even before the February election, Netanyahu made clear he wanted as broad a coalition as possible if he won. But his refusal to support a two-state solution or agree to a power-sharing deal with Kadima’s Tzipi Livni cost him the support of Israel’s largest political party in coalition negotiations.

For a while it appeared that Netanyahu’s only allies were on the right — enough to form a government and become prime minister, but not enough to keep him safe from a no-confidence vote if he were interested in substantive progress in Israeli-Palestinian negotiations. And a narrow, right-wing coalition certainly would not have won Israel much favor overseas.

But when Netanyahu succeeded last week in bringing the center-left Labor Party into his camp and promised to be a “partner for peace,” his government became more palatable to left-wingers in Israel and to allies abroad.

Others, however, blasted Labor for providing what they described as a fig leaf for a right-wing Netanyahu agenda.