I want to go right back to 1914 and the First World War. The Ottoman Empire declared war on Britain, France and Russia and, despite some initial successes, was rapidly collapsing by 1916 in the face of Russian advances into Anatolia, and Arab and British forces pushing up from Egypt.
At the end of the war the Ottoman Empire's territory in the Levant was divided up between Britain and France. France received modern Syria and Lebanon, while Britain received Palestine and modern Jordan. Pressure from Woodrow Wilson's US government led to the creation of the League of Nations, and Britain and France were obliged to run the territories they had received in the Middle-East as League of Nations 'Mandates'.
A Mandate, essentially, was an agreement between the imperial power (i.e. Britain or France) and the League of Nations that they would govern the new territory, develop it and introduce political institutions with a view to establishing independent states in the fullness of time (i.e. when the people were judged as fit to self-govern). Britain undertook the Mandate of Palestine officially in 1922. It began with the statement that Britain would seek to establish a Jewish National Home in Palestine, without prejudicing the civil and religious rights of the existing community of Palestine (i.e. the Arabs).
This was unworkable. Riots broke out in 1929, in 1936 the Arabs went on general strike and between 1937-39 the Arabs rose in open revolt as Jews fled en masse from Nazi Germany. They objected strongly to large-scale immigration of Jews, the fact that Jews would only employ Jewish labour, and the purchase of large amounts of land by Jewish interests, leading to many Arab peasants becoming landless. The Jews on their part were mainly Zionists and wanted to form a Jewish state in Palestine, without any restrictions on immigration. They resented the Arabs for using outdated agricultural techniques and for attacking their settlements, and the British for restricting their immigration and land purchases, and refusing to entertain the idea of a Jewish state.
Neither group would compromise with the other, despite repeated efforts by the British to find a solution. During the Second World War Britain armed sections of the Jewish population, giving ample opportunity for them to smuggle weapons to their militias - the Haganah, Irgun and LEHI. The latter group were terrorists - in 1944 they assassinated Lord Moyne, a friend of Winston Churchill, in Cairo, leading to a serious crackdown on their operations by the British authorities cooperating with Haganah, who believed LEHI to have gone too far.
After the end of the war, Haganah and Irgun pretty much waged an undeclared war on Britain. A serious insurgency began, culminating in the bombing of the head of British administration, the King David Hotel, in 1948. Britain, effectively bankrupt and under pressure from Harry Truman to give the Zionists what they wanted, transferred authority to the UN and hastily evacuated the country. The Jews and Arabs immediately turned on each other and the former group, being far better organised and armed, crushed the native Arabs and expeditionary forces sent by Egypt and other adjacent states. The state of Israel was thus formed.
Now, I haven't given the full story. Far from it, but I wanted to gather opinions on why Palestine/Israel has turned out the way it is. Who is responsible? I will give my opinion later, and I may expand on certain points.
None.