New election, which comes after no party was able to form a government, provides a lifeline for Prime Minister Benjamin Netanyahu

TEL AVIV—Israel will hold a third election in less than a year after lawmakers missed a deadline to find a consensus candidate to form a government, prolonging months of political stalemate at a time when the country faces threats ranging from Iran to militants in Gaza to an uncertain economy.

The third election, to be held in March after no party was able to form a government following inconclusive votes in April and September, provides a lifeline for the country’s right-wing Prime Minister Benjamin Netanyahu, the country’s longest-serving leader. He is now better placed to fight corruption charges while in office at least until the next election.

Mr. Netanyahu was indicted on corruption charges last month on allegations he accepted hundreds of thousands of dollars in champagne and cigars and favorable media coverage in exchange for favors for wealthy supporters. Mr. Netanyahu denies any wrongdoing. As premier, parliament is more likely to grant him immunity if, as expected, he seeks it.

His Likud party is expected to hold a primary leadership contest on Dec. 26, and Mr. Netanyahu faces a challenge from popular rival Gideon Saar, a former interior minister. Mr. Netanyahu remains popular among the party’s rank-and-file and it isn’t clear whether Mr. Saar can defeat him.

However, achieving a breakthrough at the next election may be difficult, given Israel’s fractious political system. Whoever wins the most seats has to try to cobble together a coalition with smaller parties. Mr. Netanyahu failed to gain enough support in the 120-seat parliament, called the Knesset, in April and September. His rival Benny Gantz, a former military chief and head of the centrist Blue and White party, also failed last month.

The third vote happened after the heads of both of the largest parties and the parliament exhausted all the possible avenues to try to form a government. It will be the first time Israel holds three elections within a year. Early polls indicate that neither side will build enough support to form a government, suggesting a continued deadlock.

Mr. Netanyahu risks losing support. A poll released Tuesday by Israeli television’s Channel 13 showed that Mr. Gantz’s Blue and White would get 37 seats to Likud’s 33. The center-left coalition, led by Mr. Gantz, would get 60 seats, only one seat short of a 61-seat majority, while Mr. Netanyahu’s right-wing and religious bloc would be nine seats short of a majority, according to Channel 13. The poll also found that Mr. Saar would bring three more seats to the right-wing coalition than if Mr. Netanyahu was leading the Likud party. Read more at WSJ