One of the major reasons for which the Arab (Palestinian) -Israeli conflict is so hard to be settled is that, in a way, both sides would like to gave control over all the territory. The Palestinians remember having more control over the land, and any peace treaty would leave them disappointed, and the Israeli side would like to have a secure state in a hostile environment (for many other reasons other countries in the Middle-East are hostile to Israel), but it is also likely that Israel also doesn't want to give up on land, as seen by the settlements.
Politically, one of the two parties that rule and have influence over Palestine, Hamas, is considered to be a terrorist organization by many, which makes the Israeli side not trusting the Palestinian side in peace with Israel. However, current leadership of Israel also does not want to grant Palestinian independence. The radical parties in both counties are fueled by mutual distrust and in this way a vicious circle happens.
Note that this is a very controversial topic, and many will likely disagree with this.
