From Eric Dondero:

Last Wednesday, longtime incumbent Republican Senator Jon Kyl of Arizona announced his retirement. The move opens up the Senate race for 2012. Libertarian Republican Cong. Jeff Flake became an instant favorite for the GOP nomination, across the Republican spectrum.

From fellow libertarian Stephen Moore, WSJ:

The decision by Sen. Jon Kyl (R., Ariz.) not to seek re-election in 2012 has caused a flurry of interest in a possible run by Rep. Jeff Flake for the seat. Mr. Flake, whose district covers suburban Phoenix, has a reputation as a super-hawk on spending and led the fight against earmarks in the House. He has a near-perfect record on fiscal issues with the National Taxpayers Union.

Mr. Kyl's announcement came as a bit of a surprise, particularly because he is the Senate minority whip and second in line behind Mitch McConnell of Kentucky to be majority leader if Republicans take control of the Senate after the 2012 elections. Mr. Flake has not made an official announcement, but a long-time aide and friend of the congressman tells us that "Jeff is definitely going to run."

There's also been rampant speculation on liberal blogs that if Gabriele Giffords recovers sufficiently, she'd be an instant favorite on the Democrat side.

Note - Flake is a fifth generation Arizonan. He is in his 5th term in Congress. He was rated in the 2010 Liberty Index published by the Republican Liberty Caucus as the most libertarian member of the US Congress.