This is an interesting question and the key issue revolves around the 96 elections. IOTL Labor lost seats but still won the plurality of seats. However, in 1996 the Israeli electorate voted for a person for Prime Minister. This person was then given the opportunity to form a government (and if he could not new elections would be called). Netenyahu won a very slight majority over Peres. If Rabin had lived I think there is a decent chance he would have won the election but had a similar number of seats (meaning he would have formed a relatively unstable coalition). Specifically, his only real option (assuming a similar breakdown as OTL) would be Labor, Meretz, Shas and a couple of Arab parties. Bringing Arab parties into the coalition would have been hugely controversial and would have profound changes to the peace process. I would say it would have either broken the back of the settler movement (and therefore allowed some type of two state solution) or it would have led to such an intense backlash that a hard right government would come to power.