That's not quite how it worked there. Jews have continuously lived there for thousands of years.
So can be said for (some of) the Palestinians.
Around a hundred years ago more started moving back, the Caliphate was cool with it, even sold much of that land to Jews.
How much, of which parts, of Levant...?
BTW, what if the US sold some land in Iraq to the Japanese after the 2003 war...?
The Ottomans welcomed the prosperity the immigration would bring. In fact, the Caliphate had a fairly decent policy regarding the whole thing and relations between Muslims and Jews.
Sure, it helped their failing economy.
But then the Caliphate fell, and the locals took over. Back when Jews were still a tiny minority, Muslims were rioting over their immigration and attacking their settlements. The Haganah was formed to protect Jews from these attacks, such as Jaffa, Hebron, and Safed.
You left out the British Mandate totally. BTW, Haganah may have begun as a loosely organized local defence force, but its role, AFAIK, has drastically changed in later years. By 1947, it's become a full-fledged military.
Of course immediately upon creation of the tiny Jewish homeland at the edge of of a Muslim sea, the combined might of several surrounding Muslim countries tried to wipe them out. The land Israel holds today is the result of repelling that and later invasions.
The fact that Israel was able to create a state like out of thin air (which wasn't, but that idea has been spread to imply something like divine intervention) might have showed that, 1) the "might" of the Arab states at that time is questionable at best, 2) the Israelis had a stronger military force and better strategies than the Arab armies, or 3) a combination of both.
In addition, you continually see cited the Palestinian refugees, several hundred thousand fled or expelled from Israeli-controlled areas. What about the Jewish refugees? Almost a million were expelled or forced to flee violence and oppression in most of the Arab Muslim countries. Jews were killed in pogroms in most Arab countries, their rights rescinded, property confiscated, forced to flee.
I can't turn back the clock and see how it would happen, but I wonder they wouldn't have been, if not the Jews took Palestine by force like that.
Many just want all the Jews out, no recognition. The best you get is as you say the Palestinian Authority refusal to recognize Israel's right to exist as a Jewish state. They simply cannot have it, since it offends their sense of religion. Forget the Muslim states surrounding Israel (and constituting a persistent threat to Israel's security), this one Jewish state cannot be allowed.
The contentious issue of whether to recognize Israel is a Jewish state or not is, in my opinions, that there are 1.2M Israeli Arab, to recognize Israel as a Jewish state means to legitimize the discrimination against them.
The Israeli Declaration of Independence stated that "the State of Israel would ensure complete equality of social and political rights to all its inhabitants irrespective of religion, race or sex, and guaranteed freedom of religion, conscience, language, education and culture".
So if Jewish people remain the majority, then it's a Jewish state by number count.
But even that is a very recent concession, not sincere IMHO. They're still teaching their kids that Jews have no historical claim to the area, that it was always Muslim.
Did you know there was even an uproar in Palestine over the UN wanting to mention the Holocaust in their schools in Palestine? Its mere mention as one of the founding reasons for the UN's Universal Declaration of Human Rights was considered offensive. No sympathy for Jews allowed when they are trying to teach the kids that the Jews are the powerful evil oppressors (especially when the Palestinian Muslims were complicit in said Holocaust).
Again, it's in my opinions that you're over-generalizing, as if you've held country-wide census. I personally find (some of) the local people, be it Jews or Palestinians, more accommodating than you.
Make no mistake, I'm not against the Israelis, and I've defended them before Palestinians, during discussions, that's. But I think it's wrong for Israel the state to continually oppress the Palestinians, and they are not allowed to defend themselves, as if every Jew is a patron saint and every Palestinian (Muslim) is a terrorist.