In 1947 the UN voted to give the Jews their own state and the Palestinians their own but the Arabs refused which started a civil war. The Arabs lost the war and on May 14th 1948 the Israelis declared independence.Actually the occupied territories don't belong to Israel. And this whole conflict has less to do with religion than it does ethnicity. And I don't know if you're aware of this, but the Israelis are committing apartheid. Look what happened at Deir Yassin. They rounded up an entire Palestinian village, murdered them, and stuffed the bodies into a well before the U.N. could get there. I'm not saying the Arab countries aren't at fault, I'm just saying Israel is as much to blame as anyone for the conflict.
The Palestinians were given a country and their land just as Israel was in 1948 but refused to the peaceful agreement that gave them both their own lands. Then the Arab armies of several other countries attacked Israel which resulted in the loss of almost 80% of palestine lands to the Israelis. If the Arabs would just let the Israelis live in peace then both the Palestinians and the surrounding countries would still have all their land instead of having to lose parcels after each time they attack Israel. Finally, how much land has Israel given back throughout the years of war?
Look at Egypt if you want to see how big a country is compared to how small it could be if Israel wasn't willing to give up land for peace.