Three weeks after US President Barak Obama took office, Likud leader Binyamin Netanyahu received sufficient votes in the February 10,2009 Israeli elections to begin to put together a right- of -center coalition government, something he had accomplished by 1 April 2009. Almost immediately thereafter there was conflict between Obama and Netanyahu. Obama pushed for a two-state solution to the Israeli-Palestinian conflict while, initially, Netanyahu opposed such a solution. Obama also opposed Netanyahu's policy of settlement building on the West Bank, seeing it as an obstacle to peace. On the other hand Netanyahu was strongly opposed to Obama's policy of engagement with Iran, seeing it as an opportunity for the Iranians to procrastinate while further developing their nuclear capabilities. Over the course of the next year and a half, however, there was movement by both sides. Netanyahu agreed to a two state solution in a mid-June 2009 speech at Bar-Ilan University, and also agreed to a partial settlement freeze, although many of his critics, both Israeli and Palestinian, questioned how serious the freeze was. For his part, Obama eased the pressure on Israel's settlement policy, even as he sought to restart peace talks between the Israelis and Palestinians. This paper, which is partially based on interviews at the Israeli Foreign office and at the US State Department, will analyze the reasons for the changes in both Obama's and Netanyahu's policies. It will explore the dynamics--and problems--of Obama's engagement policy; the other foreign policy issues such as Afghanistan and Iraq which increasingly took up Obama's time; the domestic political issues such as health care which also weighed more and more heavily on Obama; and the lack of willingness on the part of the Palestinian Authority to renew peace talks with Israel until it fully stopped settlement construction. It will also explore the constraints on Netanyahu from the right-wing elements of his governing coalition, particularly the religious parties. The paper will conclude with an analysis of the possible impact of an Israeli strike against Iran's nuclear installations on US-Israeli relations. Given that most Israelis have little faith that the US will be able to enact serious sanctions against Iran; or, even if the US gets unexpected support from China and Russia for such sanctions, whether the sanctions will be able to stop the Iranian nuclear enrichment program, Israel is actively considering a strike on the Iranian nuclear installations.