A couple of posters to the comments have asked, basically, what can Israel do?
With an earnest wish that the people of the Middle East, all of them, Israeli, Lebanese, Palestinian, Jew, Arab, Shiite and indifferent find a way to live their lives in peace and harmony; if I were in a position to be able to talk straight to the Israeli leadership and people, here is what I would suggest;
1. First and foremost, stop lying to the world and possibly to yourselves. The number one cause of all the trouble is the occupation of the territories conquered in '67 and all it's attendent evils; walls, apartheid roads, curfews, home-demolitions and most of all the intrusion of settlers. Israel is principally to blame for the situation and is therefore in a unique position to solve it. Stop portraying yourselves as victims, it ill becomes you. Arab terrorism has come about because of Israel's policies; it is a result, not a cause.
2. Start talking to your Arab neighbours instead of bombing them. The Council of Arab States proposed a sensible settlement in 2002, which Israel has so far ignored. Basically it is the old formula of land for peace. It is at least worth talking about, isn't it?
3. Israel should announce it's own goal of achieving a just peace, and hold up the offer of giving back the Occupied Territories. And this should be a genuine offer, to get out of all the West Bank. None of these carping caveats about keeping "major settlement blocs." The settlements are illegal and have no business being there in the first place. (And before anyway says Oslo was such an offer, they should read up on it a bit more.)
4. Israel should demonstrate good faith by immediately announcing a total freeze on new settlements. Further unilateral gestures could include opening all of the West Bank to free internal movement (no checkpoints except at the border with Israel) and withdrawal of the IDF from all areas not absolutely essential to security. Mostly, find ways to make the lives of ordinary Palestinians a little less hellish.
5. Open an international conference to discuss the eventual disposition of Jerusalem as some kind of international zone with protection for all religions.
6. Recognize the democratically elected government of the Palestinians, Hamas or not, and start talking to them.
7. Eventual peace would mean total withdrawal from all occupied territories. All the settlements must go unless the settlers are willing to become Palestinian citizens, and live under Palestinian rule and protection. Israel would still have something like twenty percent more Palestinian land than allowed for by the partition of 1947, but I think the world is willing to wink at that. If any land must be retained for the purposes of secure frontiers, then the Palestinians must be compensated with transfer of other lands; likely from the Galilee which was supposed to be theirs anyway.
With sixty odd years of bitterness behind them, it may be difficult for the parties to easily agree. But the alternative is an endless cycle of violence. The stark fact is that Israel can never in a thousand years fight it's way to lasting security. Negotiation and a willingness to right past wrongs is the only hope for the Jewish state in the long run.