An anti-immigration populist party could be set for a role in the Swedish government, with a right-wing bloc in pole position on Monday to win elections helped by a wave of protest over gang violence.

Sunday's national election remained too close to call on Monday with about 5 percent of election districts yet to be counted, but early results gave right-wing parties 175 of the 349 seats in the Riksdag, one more than the left bloc.

Overseas postal ballots were still to be counted and while they have historically tended to favor the right, this means a full preliminary result is not due until Wednesday. All votes are then counted again to provide a final tally.

If the results are confirmed, Sweden, which has long prided itself on being a bastion of tolerance, will become less open to immigrants as the war in Ukraine continues to force people to flee and climate change is pushing many to leave Africa.

Political observers say Moderate Party leader Ulf Kristersson is likely to become prime minister in a minority government supported by the anti-immigration Sweden Democrats, led by Jimmie Akesson, who are poised to become the largest party on the right and will have a big say on the new administration's program.

The party, which has white supremacists among its founders, is expected to stay formally in opposition, however, with many voters and politicians across the political spectrum uncomfortable with seeing it in government.

"It is the Sweden Democrats who have driven the right-wing bloc along, both in terms of shaping the political content and in attracting voters to the constellation," the independent liberal newspaper Goteborgsposten wrote.

"For Sweden, a new political era awaits."

What's unlikely to change is Sweden's path towards NATO membership, which has broad support in the wake of Russia's actions in Ukraine, as well as the country's plans to boost defense spending.

Prime Minister Magdalena Andersson, of the ruling Social Democrats, pledged in March to increase the military budget to 2 percent of gross domestic product in response to a deteriorating security situation in Europe following what Moscow calls its "special operation".

When Kristersson took over as leader of the Moderates in 2017, the Sweden Democrats were shunned by the right and left. But he has gradually deepened cross-party ties since a 2018 election loss and the Sweden Democrats are increasingly seen as part of the mainstream right, having moderated some policies such as dropping plans to leave the European Union.

Kristersson will now likely struggle to formulate his economic agenda, as inflation runs at its highest in about three decades and energy costs are soaring, with the Sweden Democrats opposed to his flagship policy plank of benefit cuts.

"Intense negotiations are expected and it might take time to form a new government. Fiscal policy will likely remain expansionary regardless of which side wins," Nordea Markets said in a note to clients.

Preliminary results have shown the Sweden Democrats with 20.6 percent of the vote, up from 17.5 percent in the previous election.

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Campaigning had seen parties battle to be the toughest on gang crime, after a steady rise in shootings that has unnerved voters, while surging inflation and the energy crisis following the war in Ukraine have increasingly taken centre-stage.

While law and order issues are home turf for the right, gathering economic clouds as households and companies face sky-high power prices had been seen boosting Andersson, viewed as a safe pair of hands and more popular than her party.

Andersson was finance minister for many years before becoming Sweden's first female prime minister a year ago. Kristersson had cast himself as the only candidate who could unite the right and unseat her.