Spain’s outgoing PM Mariano Rajoy said he will seek to form a new government.
His conservative Popular Party won the most seats in Sunday’s general election, but not enough to gain an absolute majority. Nevertheless, with the most votes, he will have the first shot at forming a government.
"I will try to form a government, a stable government," he told hundreds of cheering supporters outside his party's headquarters in Madrid.
"We will need to talk a lot, negotiate and reach agreement," he added.
The announcement comes against a backdrop of stock market jitters at the inconclusive result and fears of instability and political uncertainty.
The parliament is composed of 350 members. The Popular Party was reduced to 123 seats where previously they held 186.
The Socialists now have 90 seats.
The two new parties which have broken the traditional domination of the conservative-socialist exchange of power, Podemos and Ciudadanos, together captured 109 seats.
The results mean the only parties able to form a majority with Rajoy would be the Socialists or Podemos. Neither party seems a likely candidate.
As head of state, King Felipe VI will nominate a prime minister after talks with the leaders of each party which has gained seats.
The nominated leader must then win a vote of confidence in the assembly to take office.
On a first vote the candidate must receive more than half of the 350 lawmakers in parliament in order to form a government.
If that fails he must get more votes for him than against him in a second ballot 48 hours later.
If there is still a deadlock within two months of the first vote in parliament, the king must call a new election.
Investors are concerned that the split results could result in weeks of political wrangling.
Spanish stocks took a hit and government bonds were sold off after the result was clear. This was in sharp contrast to other European indices which all reported gains despite a further drop in oil prices to an 11-year-low.
