JERUSALEM: Israel's main political parties were to begin intensive coalition talks on Sunday a day after Prime Minister Benjamin Netanyahu was formally tasked with forming a new government after last month's election.

Netanyahu, whose rightwing Likud-Beitenu list won a narrow victory with 31 of the Knesset's 120 seats, now has 28 days to piece together a coalition government which will face a series of key domestic and foreign policy issues.

He has said that preventing a nuclear Iran will be the top priority, but the new administration will also have to deal with a surge in tension with war-torn Syria and renewed diplomatic pressure over the frozen peace process.

It will also face pressing domestic challenges, with a larger than forecast deficit paving the way for an austerity budget likely to ignite simmering public anger over the rising cost of living.

Netanyahu's negotiating team was to meet at 1130 GMT with Yesh Atid, the new centrist party headed by Yair Lapid, which stunned the political establishment by taking 19 seats and which is expected to hold a key role in government.

They will then meet Naftali Bennett, whose far-right Jewish Home party won 12 seats, and later with the ultra-Orthodox Shas party (11 seats). Both parties are hoping to be part of the coalition.

Talks are set to continue on Monday with the ultra-Orthodox United Torah Judaism (7 seats), and the two centrist parties HaTnuah and Kadima, which won six and two seats respectively.

Netanyahu has said his new government's priority will be preventing a nuclear Iran, but it is domestic issues which are likely to create problems in the coalition negotiations.

Yesh Atid has said its main priorities are to ensure a more equal sharing of the burden of military service by drafting the ultra-Orthodox, changing the system of government and renewing peace talks with the Palestinians.

Although Jewish Home takes a similar line on drafting the ultra-Orthodox, the faction is opposed to the creation of a Palestinian state and by extension a renewal of peace talks.

Shas and UTJ are likely to baulk at demands to begin drafting the ultra-Orthodox community into the military.

Another potential coalition partner is HaTnuah headed by former foreign minister Tzipi Livni who campaigned for renewal of peace talks with the Palestinians.