1. The area was controlled by the British, much like India, South Africa, and Canada were at one time. Arabs were the people living on that land.
2. The state of Israel was created, and control was handed over to the Jews. Many Arabs were kicked off the land.
3. Surrounding Arab countries attacked Israel so Arabs could go back to their homes.
4. Israel and its allies won that war and all of the following wars.
5. Arab countries do not officially recognize Israel as a country because it's basically a piece of land that was stolen, similar to how Germans controlled the French territory of Alsace-Lorraine between the Franco-Prussian war and WW1.
6. In response to Arabs not recognizing Israel as a state, Israel and the US refuse to allow the creation of Palestine, a new Arab state.
Think of it like if China occupied California, and they changed the name of California to Chinrael. The Californians living in California would be kick out, and they would move to the nearby states like Nevada. A bunch of Chinese would move to Chinrael, and the UN would accept Chinrael as a new country. The surrounding states of Nevada and New Mexico would attack Chinrael to kick the Chinese out, but Chinrael successfully defends the land because they are backed by the huge army of China. Since military action failed, the ejected Californians would resort to terrorism and doing things like suicide-bombing buses in Chinrael. In retaliation to the Californian suicide bombers, Chinrael would launch military retaliation attacks against settlements of Californians living along the Nevada-California border.
The obvious solution to the problem of Chinrael would be to abolish the state and have the Chinese go back to China, but anyone speaking out against Chinrael is called a racist.