To set up cluster peering, two essential components are required: a DNS service on each cluster to resolve the hostnames of the peer cluster nodes, and an intercluster logical interface (LIF) on every node to facilitate communication between the clusters. DNS is necessary for name resolution, which is vital in establishing connections and ensuring proper communication between nodes. Additionally, having an intercluster LIF on each node ensures that there is a dedicated network path for intercluster communication, providing redundancy and reliability.