It is well understood that the only viable way to bring peace between Israelis and Palestinians is to go back to the original plan and have two distinct countries. This is the stated position of world leaders and the UN. It has been accepted by both sides in the conflict.
Two major issues remain, though: refugees and Jerusalem. Palestinians want Israel to grant citizenship to the millions of Palestinians registered as refugees by the UNRWA and Israel flatly refuses. Palestinians want East Jerusalem to be their capital and Israel flatly refuses. However, there is a crucial difference between these issues which makes one a major obstacle to peace and not the other. This is the question of consensus.
In the same way as the two-state solution has gained unassailable consensus in the international community, so too has the solution to the refugee issue. Everyone understands that Palestinians will not become Israeli citizens and must accept compensation instead. The refugee issue is not a major obstacle to peace since the solution is there and agreed upon. All that is required is for the Israelis to agree to a proper level of compensation and for Palestinians to accept the inevitable. Those are not trivial requirements but nevertheless the starting point is known.
When it comes to Jerusalem, however, thinking is confused and unclear. The consensus appears to be that East Jerusalem should serve as the capital of a future Palestine. But does that mean that the city is to be divided into two separate cities with a border snaking through it? Should the city be shared with free movement between its two parts? Should sovereignty be divided or held by one side with some form of autonomy granted to the other?
These important questions have not been addressed and no consensus exists. There is, therefore, no viable plan for peace that could be implemented. Instead there is hand-waving and wishful thinking. The so-called Road Map for Peace leaves the issue of Jerusalem as a matter for negotiation, offering not even a hint at what the city might look like once peace is concluded.
Until there is a consensus on what Jerusalem will look like once a Palestinian state has been created, there is not much prospect for peace. It is, of course, a very complicated issue which is probably why there is such reticence to discuss it. But if there is to be peace, then there must be an international consensus on this issue, just as there is with regards to the refugees.
Without it, Palestinian and Israeli negotiators will each state their claims and reject whatever the other proposes. With it, the sides enter negotiations with a firm peace plan on the table and their job is to tweak it until it is acceptable.
There is also the question of public opinion. People cannot be convinced to agree to a non-existent plan. But, if there is consensus on a specific deal, then people can work to change public opinion in favour of it.
This is why Jerusalem is now the biggest obstacle to peace between Israelis and Palestinians.