If there were a simple solution, someone would have brought it about a long time ago. My own sense is that the Palestinians and their advocates have stubbornly persisted in an all-or-nothing approach, which has not only left them consistently with nothing, but with increasingly less than they had to begin with. In the meantime, Israel slowly creeps deeper and deeper into Palestinian territory with settlements, having found ways to keep Palestinians from succeeding with terrorism.
2. Historically, the beginnings of this situation go back to 1918, when the Ottoman Turks were defeated in World War I, and Britain became the protector of what today is Syria, Palestine, and Iraq. Britain was to watch over these territories "until such time as they are able to stand alone." This territory was known at that time as the "British Mandate," set to expire in 1948.
The British got it from both Arab and Jewish sides in this period. From 1936-39 there was an Arab Revolt against the British and the increasing Jewish population.  From 1939-38 especially there were underground Jewish groups that carried out actions against the British, the most famous of which was the bombing of the King David Hotel in 1946. 
|1947 UN Partition Plan|
3. Partitioning increasingly seemed the only viable option. After World War II, the United Nations proposed a Partition Plan for Palestine: two states, one Jewish and one Arab, with Jerusalem and Bethlehem under international oversight. But the day after the Mandate came to an end, on May 15, 1948, there was a scramble.
The Jews were prepared and organized. They immediately declared themselves a state and moved to occupy parts of Jerusalem. Palestinian Arabs fled central Palestine in large numbers. The Arab League launched the 1948 Arab-Israeli War. A year later, Israel had 60% of the territory that the United Nations had intended for an Arab state.
4. In 1967, as Egypt was amassing forces in the Sinai peninsula, Israel launched a preemptive strike that was incredibly successful. After this Six-Day War, Israel effectively occupied the Sinai peninsula, the West Bank, and the Gaza strip. Most calls for a two-state solution since have pushed Israel to return to its pre-1967 boundaries and yield these occupied territories to the Palestinians.
In 1973, Egypt and Syria fought back in the Yom Kippur War. Egypt sought to regain the Sinai Peninsula, while Syria tried to restore the northeastern Golan Heights. Although the war largely ended with the Israelis still in control of this territory, it helped drive both sides to the negotiating table.
In 1978, Jimmy Carter negotiated the Peace Accords that resulted in a planned withdrawal of Israel from the Sinai peninsula and its return to Egypt (Anwar Sadat, the president of Egypt, was assassinated by his own as a result), which was completed in 1982. Egypt became the first Arab state to recognize Israel as a nation. The Golan Heights were incorporated into Israel.
In 1994, the country of Jordan finally recognized Israel as a country, the second Arab state to do so.
5. An "intifada" was launched by Palestinians against the Israelis in 2000. From 2000 to 2003 there were some 73 suicide bombings. As a result, the construction of a wall was begun. From 2003 to 2006 there were only 12 attacks. The wall cuts at points into what was considered Palestinian territory before 1967, that is, across the green line.
6. In 2005, Ariel Sharon unilaterally withdrew Israelis from settlements in the Gaza strip back to the 1967 green line, and Israel abandoned four settlements in northern Samaria. Then in 2007 Hamas took over Gaza, resulting in mortars and rockets frequently being fired into Israeli territory.
You can see what John Kerry was thinking when he said that the UN resolution is the only hope for a two-state solution. Many would consider there now only a one state eventuality likely--Israel in control of all these lands. Jimmy Carter has urged Obama to unilaterally recognize the Palestinian state before leaving office.
8. Christian theology and pre-millennial interpretation has played a dominant role in US support for Israel over the Palestinians, even though there are far more Palestinian Christians than Israeli ones. Nazareth is within Israel but is primarily Palestinian Christian. Bethlehem is outside Israel, outside the wall, but is predominantly Palestinian Christian.
Nevertheless, the re-establishment of Israel is often considered a fulfillment of biblical prophecy. This could certainly be true. Others would say it was a self-fulfilling prophecy. God sometimes "reinspires" Scripture with new meanings too, so it could be a fulfillment even if it wasn't an original meaning to various biblical passages.
What does the Bible teach?
9. Old Testament Scriptures relating to the reestablishment of Israel were originally dealing with the Babylonian captivity, not with the present day. These were fulfilled in 538BC when Cyrus allowed the Jews to return to Jerusalem (e.g., Isa. 45:1; Ezra 1). Similarly, the temple was already rebuilt in 516BC. The wall was rebuilt in the 400s by Nehemiah.
It is not clear that any prophecy about the temple in the OT remains to be fulfilled, not least because Jesus has atoned for all sins. The Jerusalem of eternity will have no temple (Rev. 21:22).
There is no straightforward prediction of a rebuilt temple in the New Testament. Again, Hebrews indicates that there is no need for an earthly sanctuary. If Hebrews dates to the time after the temple was destroyed, one of its purposes would actually have been to tell Christians not to grieve over the absence of a temple because no earthly sanctuary was ever really able to take away sin.
Mark 13 in context was primarily about the destruction of Jerusalem in AD70 rather than end times. Some material relates to the return of Christ, but this is unexpected, since Jesus was clearly talking about the temple of his day, not in the future (13:1-4). Revelation says nothing about a rebuilt temple or Jerusalem, other than the heavenly Jerusalem that comes down at the beginning of eternity.
10. The only possible hint about a rebuilt temple is 2 Thessalonians 2:3, but anyone reading this verse originally would have thought Paul was talking about the temple that was still standing at the time in his day. Nothing is said about a rebuilt temple, although I won't say it won't happen. We generally understand fulfillments in hindsight, not in foresight.
11. The clearest statement about Israel's future is Romans 11:26, which probably implied that, around the time of Christ's return, there will be a mass conversion of Jews to Christ. This obviously hasn't happened, since Israel is not Christian in belief (about 2% of Jews in Israel are Christian). About 40% of the Jews in Israel are secular Jews even in relation to Judaism. So current Israel is not yet the fulfillment of this statement.
Nevertheless, we do get a hint that Jerusalem will not always be in the possession of Gentiles. Luke 21:24 speaks of Jerusalem being trampled on the Gentiles until the times of the Gentiles are fulfilled. That suggests that Luke believed there would come a time when Jerusalem would be in Jewish control again. But he was surely thinking it would be in Christian Jewish control at that time.
Revelation 21 speaks of a new Jerusalem coming down from heaven. In the meantime, Hebrews 12:22 contrasts the true Mt. Zion and Jerusalem in heaven with any earthly Jerusalem or earthly sanctuary (cf. Heb. 13:14). Similarly, Galatians 4:25 compares the earthly Jerusalem to Hagar, while Paul distances the earthly Jerusalem from the heavenly Jerusalem, which compares to Sarah (4:26).
12. All that is to say that it is quite possible that the reestablishment of Israel was part of God's plan. It is quite possible that Israel will become Christian. But the key prophecies haven't happened. Biblically speaking, current Israel remains the unbelieving Israel of Romans 9 and Acts 28.
 Jewish emigration to Palestine had been taking place as part of the Zionist movement that started in 1898.
 These groups were reacting particularly to the British "White Paper of 1939," which reduced the number of Jews who could immigrate to Palestine and the amount of land that could be purchased by Jews in Palestine.